LAKSHMI RANI,NEW DELHI vs. ITO, WARD-43(5), NEW DELHI

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ITA 6563/DEL/2019Status: DisposedITAT Delhi27 September 2021AY 2015-165 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty order was bad in law because the AO's satisfaction recorded during assessment was for concealment of income, but the penalty was levied for furnishing inaccurate particulars of income. This discrepancy, coupled with the lack of a proper show cause notice, invalidated the penalty.

What were the facts?

The assessee, engaged in financial services, filed her return of income. The Assessing Officer (AO) made an addition to her income and subsequently levied a penalty under Section 271(1)(c) of the Income Tax Act. The Commissioner of Income Tax (Appeals) upheld the penalty.

What were the issues?

Whether a penalty levied for furnishing inaccurate particulars of income is valid when the AO's initial satisfaction was for concealment of income, and if a discrepancy between the grounds for initiation and levy of penalty renders the penalty void.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3),Section 133(6),Section 274

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI

Hearing: 21/09/2021Pronounced: 27/09/2021

ORDER

PER ANIL CHATURVEDI, AM:

1.

This appeal filed by the assessee is directed against the order dated 08.05.2019 of the Commissioner of Income Tax (A)- 15, Delhi relating to Assessment Year 2015-16.

2.

The relevant facts as culled from the material on records are as under :

Lakshmi Rani vs ITO A.Y. 2015-16 2 3. Assessee is an individual stated to be engaged in the business of financial services and facilitates loans to various clients from financial institutions. Assessee filed her return of income for A.Y. 2015-16 on 27.10.2015 declaring total income of Rs.14,25,300/-. The case was selected for scrutiny under the CASS. Notices u/s 143(2) & 142(1) of the Act was issued from time to time. In response to these notices Learned Counsel for the assessee attended the proceedings and filed detailed as called for from time to time. Thereafter assessment was framed u/s 143(3) of the Act vide order dated 30.12.2017 and the total income of the assessee was determined at Rs.24,52,374/-. On the addition of Rs.10,27,074/- made, AO vide order dated 27.06.2018 levied the penalty of Rs.3,17,366/- u/s 271(1)(c) of the Act.

4. Aggrieved by the penalty order of AO, assessee carried the matter before the CIT(A) who dismissed the appeal of the assessee. Aggrieved by the order of CIT(A), assessee is now before us and has raised the following grounds of appeal:

“That on the facts & in the circumstances of the case and in law, 1. the order passed by the Ld. Commissioner of Income Tax (Appeals) [CIT(A)] and Ld. AO is wrong and bad in law.

That learned assessing officer and CIT (A) has grossly erred in 2. law and facts in confirming the action of the Ld. AO of imposing the penalty of Rs. 3,17,366/- u/s 271(1)(c) in respect of the payment of commission to agents who did not reply to the 133(6) sent by the department. The payment to these agents were made through banking channel but the appellant could not provide the current addresses of these agents as a period of about three years had elapsed and the appellant had no transactions with Lakshmi Rani vs ITO A.Y. 2015-16 3 these agents thereafter. Thus the penalty has been wrongly imposed by holding that the appellant had not disclosed true and correct particulars of her income and concealed her income.

That learned assessing officer and CIT(A) has grossly erred in law 3. and facts in confirming the action of the Ld. AO of imposing the penalty of Rs. 3,17,366/- u/s 271(1)(c) by holding that the appellant had “furnished inaccurate particulars of income”. The penalty proceedings were initiated for failure to disclose the true and correct particulars her income and concealment of her income but the penalty has been levied for furnishing the inaccurate particulars of income thus the penalty is bad in law and deserves to be deleted.

4.

That the appellant craves leave to alter, amend, add or delete all or any ground of this appeal.

That the above grounds of appeal are without prejudice to each other.

That the appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal.”

5.

On the date of hearing none appeared on behalf of the assessee though the notice of hearing was issued to the assessee. The case file further reveals that on earlier occasions also, the matter was adjourned on account of non-appearance of assessee or her Counsel. In view of the aforesaid and in the absence of any representation on behalf of the assessee, I proceed to dispose of the appeal ex-parte qua the assessee after considering the material on record and after hearing the Learned DR.

6.

Before me, Learned DR submitted that in the assessment framed u/s 143(3) of the Act, AO had made addition of Lakshmi Rani vs ITO A.Y. 2015-16 4 Rs.10,27,074/- and on such addition, penalty of Rs.3,17,366/- was levied u/s 271(1)(c) of the Act and the penalty has been upheld by CIT(A). He supported the order of CIT(A).

7.

I have heard the Learned DR and perused the material on record. The issue in the present case is with respect to levy of penalty u/s 271(1)(c) of the Act. The penalty of Rs.3,17,366/- u/s 271(1)(c) of the Act has been levied on the addition of Rs.10,27,074/- made by AO. The perusal of the assessment order passed u/s 143(3) of the Act reveals that AO has recorded the satisfaction that assessee has concealed the income. Thereafter, in the penalty order passed u/s 271(1)(c) of the Act, AO had levied penalty for furnishing of inaccurate particulars of income. It is a settled law that while levying penalty for furnishing of inaccurate particulars of income, the AO has to record satisfaction and thereafter come to a finding in respect of one of the limbs, which is specified under section 271 (1)(c) of the Act. The first step is to record satisfaction while completing the assessment as to whether the assessee had concealed her income or furnished inaccurate particulars of income. Thereafter, notice u/s 274 read with Section 271(l)(c) of the Act is to be issued to the assessee. The Assessing Officer thereafter has to levy penalty under Section 271(l)(c) of the Act for non-satisfaction of either of the limbs. While completing the assessment, the Assessing Officer has to come to a finding as to whether the assessee has concealed her income or furnished inaccurate particulars of income. The Hon'ble Bombay High Court in CIT vs Samson Perinchery (2017)

Lakshmi Rani vs ITO A.Y. 2015-16 5 392 ITR 4 (Bom) has held that where initiation of penalty is one limb and the levy of penalty is on other limb, then in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty.

8.

Considering the facts of the present case in the light of the aforesaid decision of Hon’ble Bombay High Court in the case of Samson Perinchery (supra) I am 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. I accordingly set aside the penalty order passed by AO. Thus the ground of assessee is allowed.

9.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 27.09.2021

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