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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI D.KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
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.
We shall first take up the appeal ITA No.82/PUN/2016 – A.Y. 2004- 05. The only ground raised by the Assessee reads as under :
“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
Briefly stated relevant facts are that the assessee is a HUF. A search
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.
Aggrieved with such order of the CIT(A) the assessee is in appeal before
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
Before us, at the outset, on the technical issue, Ld. Counsel for the
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 :
Hon’ble Bombay High Court in CIT Vs. Shri Samson Perinchery judgment dated 05-01-2017.
Hon’ble Karnataka High Court judgment in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (359 ITR 565)
Ld. Departmental Representative for the Revenue on the other hand
relied heavily on the orders of the AO/CIT(A).
We heard both the sides and perused the orders of the Revenue
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.”
Further, regarding other addition of Rs.12,04,584/- also on account of
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.”
The above lines from the penalty order is obvious in not containing any
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.
In the result, appeal of the assessee is allowed.
ITA No.83/PUN/2016 A.Y. 2008-09
In this assessment year, penalty of Rs.3,77,798/- was levied by the AO
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) . . . . . “.
Further, bringing our attention the penalty order dated 28-03-2013, Ld.
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 . . . . .”.
Taking a cue from the above, Ld. Counsel for the assessee submitted
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.
As discussed above, in the assessee’s own case for A.Y. 2004-05, the
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
In the result, both the appeals filed by the assessee are allowed.
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
अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. The CIT(A)-2, Aurangabad CIT-2, Aurangabad 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “B Bench” 5. Pune; गाड� फाईल / Guard file. 6. आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार
स�यािपत �ित //True Copy// Senior Private Secretary //True Copy// आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune