M/S BAYNEE INDUSTRIES,KOLKATA vs. ACIT, CIR-44, KOLKATA, KOLKATA

The brief facts of the issue are that the assessee is a firm and engaged in the business of manufacturing of automobile parts. The assessee filed its return of income declaring a total income of Rs.10,34,804/-. Against which under scrutiny the AO determined the total income at Rs.3,49,61,820/-.

Aggrieved, the assessee preferred an appeal before the CIT-A. The CIT-A confirmed some of the additions and some of the additions were partly allowed. Thereafter, the AO initiated penalty proceedings by issuing notice on 31-12-09 u/s. 274 r.w.s 271 of the Act. Thereby, he imposed a penalty of Rs.14,71,134/- U/Sec 271(1) ( c) of the Act. 1 ITA No.59/Kol/2016 M/s. Baynee Industries

Before the CIT-A the assessee contended that the AO did not give sufficient opportunity to assessee to substantiate its contentions. The assessee also contended that the AO imposed the impugned penalty only on the basis of income as determined after giving effect to the 1st appellate order and urged to drop the penalty proceeding. The CIT-A after considering the submissions of assessee confirmed the impugned penalty on the basis of addition made by the AO by stating as under:- “In this regard it is to submit that the initiation of the penalty has already been mentioned in the penalty order which has been duly confirmed by the CIT(A) and the Hon'ble ITAT. Before passing the penalty order the Assessing Officer has clearly referred in the 1st para of body of order about the grand and issues on which he has imposed penalty. The assessee has over looked the first para of the Assessing Officer's order where he has clearly mentioned and made reference of order of the Hon'ble CIT(A) and the Hon'ble ITAT, Kolkata. It is to further point out that the AO correctly mentioned about the-initiation of penalty by the earlier AO at the time of assessment order because he cannot proceed for levying penalty, if it is not initiated during the assessment order. Moreover as stated above once it is held by the Hon'ble Supreme Court that penalty is civil liability it hardly leaves any scope of description to the AO once the Order U/S 68, U/s. 69 and on bogus claim of expenses on which disallowance is made. The TDS disallowed u/s. 40(a)(ia) is not merely a disallowance but it is proved bogus also. The AO has chosen to disallow it U/S 40(a)(ia) hence it is also a concealment. (viii) Considering the above facts of the case I find no infirmity with the order of the AO and the same is confirmed and the appeal of the assessee is dismissed.”

The ld AR apart from reiterating the facts also brought to the notice of the Bench that the penalty notice issued u/s 274 read with section 271(1)(c ) of the Act had not struck off the relevant portion by specifically mentioning the charge of offence committed by the assessee viz., whether it had concealed the particulars of income or it had furnished inaccurate particulars of income. The ld. AR argued that the show cause notice issued for penalty proceedings was defective and in support of this, he placed reliance on the decision of the Hon’ble Karnataka High Court in the case of CIT vs SSA’S Emerald Meadows in ITA No. 380 of 2015 dated 23.11.2015 which was later approved by the Hon’ble Supreme Court by dismissal of Special Leave Petition (SLP) filed by the Revenue in CC No. 11485/2016 dated 5.8.2016. In response to this, the ld DR vehemently relied on the order of the ld AO.

We have heard the rival submissions. We find that the penalty notice dt. 31-12-09 u/s 274 r.w.s 271(1)(c ) of the Act does not specify the

We find that the Revenue had preferred a SLP before the Hon’ble Supreme Court against this judgment which was dismissed in CC No. 11485/2016 dated 5.8.2016 by observing as under:- UPON hearing the counsel, the Court made the following ORDER Delay condoned. We do not find any merit in this petition. The special leave petition is , accordingly dismissed. Pending application, if any, stands disposed of.

Respectfully following the aforesaid judicial precedents, we cancel the penalty levied of Rs.14,71,134/- U/Sec. 271(1) ( c) of the Act and confirmed by the CIT-A. Accordingly the grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed. . Order pronounced in the open court on 05-05-2017