RADHESHAM JHUNJHUNWALA,,PUNE vs. INCOME-TAX OFFFICER,,

PER D. KARUNAKARA RAO, AM :

There are 2 appeals under consideration filed by the Assessee against

the separate orders of CIT(A)-2, Aurangabad commonly dated 01-02-2015 for the A.Yrs. 2004-05 and 2008-09. The penalty was levied by the AO u/s.271(1)(c) of the Income Tax Act in both the years.

“1. The Ld. Taxing authorities below had erred in levying penalty of Rs.1,70,704/- u/s.271(1)(c) of the I.T. Act. Just and proper relief may be granted to the appellant as per the provisions of law.”

2 ITA Nos.82 & 83/PUN/2016 Radheshyam Jhunjhunwala

action u/s.132 of the I.T. Act was conducted on the Shah group of Jalna and

Jhunjhunwala Group of Aurangabad on 21-02-2007. The assessee belongs to

Jhunjhunwala group and is Chairman of the Group Concern Orion Laminates

Ltd. The residence of the assessee and his business concern were covered

under the search action. The assessee filed the original return of income on

11-10-2004 declaring total income of Rs.4,77,331/-. As per the law, the

assessee filed the return u/s.153A of the Act declaring income of Rs.1,39,050/-

and agricultural income of Rs.1,38,067/-. Thus, in the opinion of the AO,

assessee deliberately understated an income of Rs.3,32,281/- which amounts to

furnishing inaccurate particulars of income and liable for penalty u/s.271(1)(c)

of the Act. AO also made addition of Rs.12,04,584/- on account of sale of land

at Isarwadi relying on the decision of Hon’ble Apex Court in the case of CIT Vs.

Sun Engineering Works Pvt. Ltd. 198 ITR 297 (SC). Eventually, AO made

addition of Rs.15,36,865/- to the total income of the assessee. Penalty of

Rs.1,70,704/- was levied u/s.271(1)(c) of the Act. CIT(A) directed the AO to

recompute the tax sought to be evaded by taking Rs.18,13,975/- as assessed

income including concealed income and Rs.1,39,050/- as assessed income

excluding concealed income.

us with the solitary ground extracted above stating that the said ground is wide

enough to accommodate the legal issue relating to the satisfaction of the AO

initiating the penalty u/s.271(1)(c) of the Act. Ld. Counsel for the assessee

submitted that the orders of the AO, i.e. Assessment order and the Penalty

order suffer from various technical issues. Failure to specify the limbs in

initiating the penalty and levying penalty is one of them.

3 ITA Nos.82 & 83/PUN/2016 Radheshyam Jhunjhunwala

assessee relied on the following judgments for the proposition that penalty is

not sustainable when there is no clear satisfaction recorded by the AO at the

time of initiation of penalty proceedings :

relied heavily on the orders of the AO/CIT(A).

authorities. We have also considered the decisions relied upon by the Ld. AR

for the assessee. After going through the assessment order and the penalty

order, we find the AO initiated the penalty for “furnishing inaccurate

particulars of income”. Thus, this is a case of furnishing inaccurate

particulars of income so far as addition of Rs.3,32,281/- is concerned. Relevant

lines from Para 9 of the assessment order are extracted here as under :

“9. . . . . . . . . . .Therefore, it amount to furnishing inaccurate particulars of income and is liable for penalty u/s.271(1)(c) of the Act. Therefore, penalty u/s.271(1)(c) are initiated.”

sale of land at Isarwadi is concerned, there is no satisfaction whatsoever is

provided in Para 11 and no limbs of clause (c) of section 271(1) are

mentioned in any form. Further, when it comes to levy of penalty on the

addition of Rs.3,32,281/- vide penalty order dated 28-03-2013, we find in Para

No.4 that penalty was levied for “concealing the particulars of income”.

There is no reference to the other addition in the penalty order. Relevant lines

from Para No.5 of the penalty order are extracted here as under :

4 ITA Nos.82 & 83/PUN/2016 Radheshyam Jhunjhunwala

“5. . . . . . . Therefore, I am satisfied that the assessee has committed default within the meaning of section 271(1)(c) of the I.T. Act. Hence, a penalty of Rs.1,70,704/- is hereby levied.”

reference to either of the limbs of clause (c) of the said section 271(1) of the

I.T. Act. It also shows that the AO has not applied his mind to the fact for

which reason of the default, the penalty notices were issued. We find the

penalty order of the AO falls short of legal requirement on the issue under

discussion. Initiation of penalty proceedings in this case was done in a casual

manner for both the limbs and such orders are bad in law. Already, we have

held in a number of cases that said manner of levying penalty without making

any reference to the specified limb, i.e. “Concealment of income” or furnishing

of inaccurate particulars of income”. Therefore, the penalty levied by the AO is

unsustainable on technical grounds. Further, this view of ours get strength by

the judgment of Hon’ble jurisdictional High Court in the case of CIT Vs. Shri

Samson Perinchery dated 05-01-2017 as well as the judgment of Hon’ble

Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning

Factory 359 ITR 565. Accordingly, the only ground raised by the assessee is

allowed.

ITA No.83/PUN/2016 A.Y. 2008-09

in connection with claim of deduction u/s.54B of the Act. Assessee submitted

that in the subsequent years such denial of deduction was held to be not

covered by the penalty proceedings on merits as well. Bringing our attention to

the satisfaction of the AO while initiating the penalty proceedings, Ld. Counsel

for the assessee read out Para No.8 of the assessment order where penalty was

5 ITA Nos.82 & 83/PUN/2016 Radheshyam Jhunjhunwala

initiated for furnishing inaccurate particulars of income. For the sake of

completeness of the order, relevant lines are extracted hereunder :

“8. Since the assessee has filed inaccurate particulars of income by filing wrong claim u/s.54B the assessee has made himself liable for penalty u/s.271(1)(c) . . . . . “.

Counsel for the assessee submitted that penalty was levied for no specific limb

of clause (c) of section 271(1) of the Act. He brought our attention to Para

No.5 and read out the following lines :

“5. . . . . . Therefore, I am satisfied that the assessee has committed default within the meaning of section 271(1)(c) of the I.T. Act . . . . .”.

that the above manner of levy of penalty without making a specific reference to

the specific limb of clause (c) of section 271(1) is unsustainable. He also

submitted that the expression “concealed income” used in Para No.5 (in the

Table) amounts to levy of penalty for “concealing the income” and not for

“furnishing inaccurate particulars of income”, i.e. satisfaction originally

opined by the AO during the assessment proceedings.

issue raised by the assessee in this assessment year too is verbatim.

Therefore, such manner of levying the penalty generally referring to the

provisions of section 271(1)(c) of the I.T. Act are not sustainable in law when

clause (c) contains two specific limbs which constitute 2 different kinds of

offences for which penalty is leviable u/s.271(1)(c) of the Act. Therefore, we

delete the penalty levied by the AO and allow the ground raised by the

assessee.

6 ITA Nos.82 & 83/PUN/2016 Radheshyam Jhunjhunwala

Order pronounced in the open court on this 03rd day of January, 2018.

Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा सद�य सद�य सद�य / ACCOUNTANT MEMBER सद�य लेखा लेखा पुणे Pune; �दनांक Dated : 03rd January, 2018 सतीश आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत

स�यािपत �ित //True Copy// Senior Private Secretary //True Copy// आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune