MOHAMMED NASRUDEEN,PUDHUKOTTAI vs. ITO, WARD 3, CUDDALORE
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI AMITABH SHUKLA
आदेश / O R D E R
PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the
Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in
short "the Ld.CIT(A)”), Delhi, dated 10.01.2024 for the Assessment Year
(hereinafter in short "AY”) 2011-12.
The main grievance of the assessee is against action of the
Ld.CIT(A) confirming the penalty levied by the AO u/s.271(1)(c) of the
Income Tax Act, 1961 (hereinafter in short "the Act”). The brief facts as
ITA No.645/Chny/2024 (AYs 2011-12) Mohammed Nasrudeen :: 2 ::
noted in the Assessment Order dated 26.12.2018 is that assessee had
deposited cash of Rs.43,47,755/- in Axis Bank, Chidambaram and did not
file return of income for AY 2011-12. Therefore, AO recorded reason to
believe escapement of income and issued notice on 22.03.2018 and re-
opened the assessment; and noted that assessee pursuant to the notice
u/s.148 of the Act had filed return of income admitting total income of
Rs.1,78,669/-. When the AO asked the assessee to furnish the nature
and source of cash deposit in bank, the assessee submitted that the
deposits were in the course of his business; and certain amounts were
earlier withdrawn and all unused cash were re-deposited; and stated that
sales receipts were credited into bank account. The AO noted from
perusal of the bank statement of bank account of the assessee that it
could not been ascertained from the entries as to whether
deposits/withdrawals related to the Maligai business or not? According to
the AO, assessee could not substantiate his running of business with any
supporting evidences like place of business, purchases, sales bills,
agencies with whom he dealt with, etc. According to the AO, assessee
failed to give any evidences. Therefore, the entire cash deposits of
Rs.43,81,277/- and non-cash deposits of Rs.9,49,898/- amounting to
Rs.53,31,175/- was assessed u/s.69 of the Act; and the AO endorsed in
the assessment order “penalty proceedings u/s.271(1)(c) of the Act,
initiated” and thereafter, the AO issued penalty notice dated 26.12.2018
ITA No.645/Chny/2024 (AYs 2011-12) Mohammed Nasrudeen :: 3 ::
for having concealed the particulars of income and levied impugned
penalty of Rs.15,50,240/- on 26.02.2020. On appeal, the Ld.CIT(A)
confirmed the penalty.
Aggrieved, the assessee is in appeal before this Tribunal.
After hearing both the parties, we are not repeating the aforesaid
facts discussed (supra) for the sake of brevity. The only legal issue that
has been raised before us is that the AO while framing the assessment
order dated 26.12.2018 u/s.143(3)/147 of the Act has not recorded his
satisfaction that the assessee has concealed the particulars of his income
as envisaged u/s.271(1)(c) of the Act, failure of which, according to the
Ld.AR is fatal for imposing penalty u/s.271(1)(c) of the Act.
The Ld.AR submitted that it is well settled that the penalty
proceedings are distinct from assessment proceedings and that both are
independent proceedings and that mere confirmation of additions in
quantum proceedings cannot per-se, lead to confirmation of penalty; and
that the assessee is at liberty to lead fresh evidence during penalty
proceedings to prove that there was neither concealment of particulars of
income nor furnished any inaccurate particulars of income. Further,
according to the Ld.AR, the first condition before initiating penalty by AO
under sub-clause (c) of sub-section (1) of section 271 of the Act is to
record his satisfaction in the course of assessment proceedings that any
ITA No.645/Chny/2024 (AYs 2011-12) Mohammed Nasrudeen :: 4 ::
person has concealed the particulars of his income or furnished inaccurate
particulars of such income, then the AO has to issue proper notice making
it clear the specific fault committed by assessee and give proper
opportunity u/s 274 of the Act and then levy penalty. Thus, according to
him, the penalty proceedings have their foundation in the assessment
order. However, in this case, according to the Ld.AR, the AO has not
made any mention about his satisfaction of initiating penalty proceedings
against the assessee [in the assessment order dated 26.12.2018] for the
faults as stated in sec.271(1)(c) of the Act (supra); and has merely made
an endorsement in the last line of assessment order that penalty
proceedings are initiated separately, which action of AO will not suffice to
initiate validly penalty u/s.271(1)(c) of the Act against the assessee. We
find force in the submission of Ld AR and find that the AO in the course of
assessment proceedings did not made any endorsement of his
satisfaction that the assessee has concealed particulars of his income or
furnished inaccurate particulars of such income, failure to do so i.e,
satisfaction of the AO in the assessment order that assessee had
concealed the particulars of income or furnished inaccurate particulars of
income was sine qua non for initiation of penalty u/s.271(1)(c)/274 of the
Act, which is absent in this case, therefore the consequent levy of penalty
is bad in law as confirmed by the Hon’ble Supreme Court in the case of
ITA No.645/Chny/2024 (AYs 2011-12) Mohammed Nasrudeen :: 5 :: PCIT v. Golden Peace Hotel & Resorts reported in [2021] 124 taxmann.com 249 (SC).
Therefore assessee succeeds and the penalty levied by AO of Rs.15,50,240/-, is directed to be deleted. Therefore, penalty deserves to be deleted and we order accordingly.
In the result, appeal filed by the assessee is allowed.
Order pronounced on the 05th day of July, 2024, in Chennai.
Sd/- Sd/- (अिमताभ शु�ा) (एबी टी. वक�) (AMITABH SHUKLA) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 05th July, 2024. TLN, Sr.PS आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF
