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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-11, Pune dated 21-01-2016 for the Assessment Year 2000-01 in connection with the levy of penalty u/s.271(1)(c) of the I.T. Act, 1961.
Assessee raised various grounds relating to the merits of levy of penalty of Rs.4,97,254/-. During the proceedings before us, assessee also raised an additional ground, undisputedly legal in nature relating to incorrect initiation and conclusion of the penalty proceedings qua the ambiguity in the mind of the AO.
On this legal issue, Ld. Counsel for the assessee brought our attention to the assessment order and read out the contents of Para No.2 and mentioned that the penalty was initiated for “concealment of particulars of income”. Further, he
2 ITA No.940/PUN/2016 Parag Yashwant Gadgil
brought our attention to the penalty order dated 31-03-2010 and mentioned that
the penalty was levied for both the limbs of clause (c) of section 271(1) of the Act.
He also submitted that the show cause notice issued by the AO u/s.274 of the Act
does not contain striking of any of the two limbs of the said clause (c) of section
271(1) of the Act. With these facts, Ld. Counsel for the assessee submitted that
the penalty in the present case is unsustainable as the said discrepancy underlines
the ambiguity in the mind of the AO with regard to the initiation as well as the
conclusion of the penalty proceedings. In this regard, he relied on various decisions
to demonstrate the existence of favourable precedents on this issue.
Ld. DR for the Revenue dutifully relied on the orders of the AO and the
CIT(A) for all three years.
We heard both the parties on this legal issue relating to the ambiguity in the
mind of the AO in matters relating to the initiation and conclusion of the penalty
proceedings u/s.271(1)(c) of the Act. We find it relevant to extract relevant lines
from the assessment order as well as the penalty order, as referred by the Ld.
Counsel for the assessee before us. In the assessment order dated 28-12-2007,
the AO has recorded the satisfaction at Para 2 of his order and the same reads as
under :
“2. . . . . .
. . . . . . . . Since the assessee has concealed these particulars of his income, I am satisfied that he has committed default within the meaning of section 271(1)(c) of the I.T. Act, 1961. Penalty proceedings u/s.271(1)(c) of the I.T. Act, 1961 has, therefore, been initiated separately.”
In the penalty order dated 31-03-2010, the AO levied penalty by holding as
under (Page 7) :
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“As such the assessee has concealed the particulars of income and furnished inaccurate particulars of such income to the extent of Rs.15,03,250/-. I am, therefore, satisfied that the assessee has committed the default within the meaning of section 271(1)(c) and has made liable for penalty. I levy the penalty of Rs.4,97,254/-......”
From the above extracts, we find it is factually evident that the AO did not
conclude the penalty proceedings for the reasons recorded at the time of initiation
of the penalty proceedings, as evident in the assessment order dt. 28-12-2007.
Further, we find there are catena of decisions in favour of the assessee on
this legal issue. We find the Pune Bench of the Tribunal in the case of M/s. D.P.
Jagtap Vs. ACIT vide ITA No. 418/PUN/2015 for the A.Y. 2010-11, order dated
15-02-2017 held as under :
“10. Thus, it is clearly evident that the Assessing Officer is not clear as to under what charge penalty has to be levied u/s. 271(1)(c) of the Act. The observations of the Assessing Officer are inconsistent while recording satisfaction, thereafter at the time of issuing notice and finally at the time of passing of the order. There is total non- application of mind by the Assessing Officer while passing penalty order.
Recently the Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery in Income Tax Appeal No. 1154 of 2014 decided on 05-01-2017 has held that failure by the Assessing Officer to specify in notice issued u/s. 274 whether ITA No. 418/PUN/2015, A.Y. 2010-11 the penalty is being initiated for furnishing of inaccurate particulars of income or for concealment of income is fatal. It reflects non-application of mind and renders the levy of penalty invalid.
Thus, in the light of above decisions and the facts of the case, we direct the Assessing Officer to cancel the penalty. The impugned order is set aside and the appeal of assessee is allowed.”
Similar view was taken by the Tribunal in the case of Shri Dilip Motilal
Chordiya Vs. DCIT vide ITA No. 762/PUN/2017 for the A.Y. 2008-09, order dated
29-11-2017. The operational Para No.6 contains the finding and the same is
extracted as under :
“6. In the present case, as noted hereinabove, it is seen that the AO has not recorded any satisfaction for levy of penalty in the assessment order but had levied penalty on both the limbs i.e., for concealment of income and for furnishing of inaccurate particulars of income while passing the penalty order. Considering the
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aforesaid facts in the light of the decision of Hon’ble Bombay High Court in the case of Samson Perinchery (supra), we are of the view that in the present case the basic condition for levy of penalty has not been fulfilled and that the penalty order suffers from non-exercising of jurisdiction power of AO and therefore penalty order cannot be upheld. We accordingly set aside the penalty order passed by AO. Thus, the ground of assessee is allowed.”
From the above facts and the legal precedents on the issue, it is evident that
the Tribunal has been consistently disapproving the penalties levied by the AO
when the (1) initiation is done for one of the two limbs and (2) penalty is levied for
both the limbs of clause (c) of section 271(1) of the Act compositely. Therefore, we
are of the opinion that the penalty levied by the AO in this appeal is unsustainable.
Thus, the legal ground raised by the assessee is allowed on technical grounds.
Consequently, adjudication of the issues relating to merits amounts to an academic
exercise. Therefore, the same are dismissed as academic.
In the result, the appeal of the assessee is partly allowed. Order pronounced on this 09th day of February, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 09th February, 2018. Satish आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-11, Pune 3. आयकर आयु� / The CIT-11, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “बी 5. बी बी” / DR ‘B’, बी ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune