SAMBIT RESORTS PVT. LTD.,BHUBANESWAR vs. ACIT, BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA Nos.429 & 430/CTK/2015 Assessment Years:2005-06 & 2006-07

Vs. Sambit Resorts Pvt Ltd., Plot ACIT, Circle -1(2), No.339(P), Goutam Nagar, Bhubaneswar. BMC Mausima Main Road, Bhubaneswar. PAN/GIR No. AAHCS 9285 P (Appellant) .. ( Respondent)

Assessee by : Shri G.Naik/S.K.Sarangi, ARs Revenue by : Shri Suvendu Dutta, DR

Date of Hearing : 25/07/ 2017 Date of Pronouncement : 27/07/ 2017

O R D E R Per N.S.Saini, AM These are appeals filed by the assessee against the order of CIT(A)—

1, Bhubaneswar, dated 28.3.2014 for the assessment year 2005-06 and

dated 21.8.2015 for the assessment year 2006-07.

assessee is that the CIT(A) is not justified in confirming the levy of penalty

u/s.271(1)(c) of the Act for Rs.5,94,630/- for the assessment year 2005-

06 and Rs.4,62,830/- for the assessment year 2006-07.

2 ITA Nos. 429 & 430/CT K/ 2015 Asse ssment Years: 200 5-0 6 & 2 006 -07 3. At the outset, ld A.R. of the assessee by filing copies of notice issued

u/s.271(1)(c) of the Act by the Assessing Officer dated 13.3.2014 in

Assessment year 2005-06 and dated 31.12.2009 in Assessment year

2006-07 submitted that the Assessing Officer in the said notices has stated

as under:

“have concealed the particulars of your income or furnished “ inaccurate particulars of such income.”

Act by the Assessing Officer whether the show cause is issued to the

assessee for concealment of particulars of income or for furnishing

inaccurate particulars of income. He submitted that in similar facts and

circumstances of the case, Cuttack Bench of the Tribunal in the case of

Shri Niranjan Pati vs ACIT in ITA No.398/CTK/2016 for the assessment year

1999-2000 and others order dated 28.4.2017 has quashed the order

levying penalty u/s.271(1)(c) of the Act.

AR projects vs ITO in ITA No.1572//Hyd/2013 for the assessment year

2006-07 order dated 4.1.2017 has also quashed the penalty order

u/s.271(1)(c) of the Act. Hence, it was his prayer that respectfully following

the same penalty orders levying penalty u/s.271(1)(c) of the Act are liable

to be quashed.

3 ITA Nos. 429 & 430/CT K/ 2015 Asse ssment Years: 200 5-0 6 & 2 006 -07 7. We have heard the rival submissions and perused the orders of lower

authorities and materials available on record. In the instant case, a search

and seizure operation was conducted in the premises of the assessee on

15.11.2007 and certain books of account and documents were found and

seized. From the seized documents, the Assessing Officer found that in

assessment year 2005-06, the assessee has made investment of

Rs.68,20,000/- for purchase of some landed property. Out of total

payment of Rs.68,20,000/-, Rs.33,75,000/- was found to be unexplained

in the relevant previous year. Therefore, the Assessing Officer made

addition to the income of the assessee u/s.69 of the Act.

the facts of the case, reduced the addition under the head “unexplained

investment” to Rs.16,25,000/-.

8.1 Similarly, for the assessment year 2006-07, the Assessing Officer

found that the assessee has made investment of Rs.68,20,000/- for

purchase of landed property at Ashok Nagar, Bhubaneswar. Out of the

total payment of Rs.68,20,000/-, Rs.22,45,000/- invested during the

relevant previous year was found to be unexplained. Therefore, the

Assessing Officer added the same u/s.69 of the Act. He also made addition

of Rs.2 lakhs on account of unexplained cash payment to Smt. Sharmila

Mitra as per money receipt seized in the course of search.

facts of the case, reduced addition under the head “unexplained

4 ITA Nos. 429 & 430/CT K/ 2015 Asse ssment Years: 200 5-0 6 & 2 006 -07 investment” to Rs.11,75,000/- while confirming Rs.2 lakhs on account of

unexplained cash payment.

Act for Rs.5,94,630/- for assessment year 2005-06 and Rs.4,62,830/- for

assessment year 2006-07, which was confirmed in appeal by the CIT(A).

the sole question arises for determination in this case is :-

"as to whether AO has initiated the penalty proceedings by issuing valid notice u/s 274 read with section 271(1)(c) of the Act by specifying as to whether the penalty proceedings are being initiated "for furnishing of inaccurate particular!!; or that for concealment of income."

the assessment years is reproduced as under :-

“Where in the course of proceedings before me for the assessment year 2005-06 & 2006-07 it appears to me that you: -

*have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice by U/s.22(l)/22(2)/B4 of the Indian Income Tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given by u/s.. 139(2) /148 of the Income Tax Act, 1961. No.___ dt.____ or have without reasonable cause failed to furnish it within the time allowed and the manner required by the said section 139(1) or by such notice.

** have without reasonable cause failed to comply with a notice u/s. 22(4)/23(2) of the Indian Tax Act, 1922 or under section 142(1) / 143(2) of the Income-tax Act, 1961.

***have concealed the particulars of your income or furnished in accurate particulars of such income.

You are hereby requested to appear before me on 20.3.2014 at 11.00 AM for the assessment year 2005-06 and on 10.2.2010 at 1.00 AM for the assessment year 2006-07 and show cause why an order imposing a penalty on you should not be made u/s 271 of the Income-

5 ITA Nos. 429 & 430/CT K/ 2015 Asse ssment Years: 200 5-0 6 & 2 006 -07 tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through Authorised Representative, you may show cause in writing on or before the said date which will be considered before any such order is made u/s.271. "

Meadows, (2016) 73 taxmann.com 248(SC) dismissed the Special Leave

Petition filed by the Revenue against the judgment rendered by Hon'ble

High Court of Karnataka whereby identical issue was decided in favour of

the assessee. Operative part of the judgment in case of M/s. SSA's Emerald

Meadows (supra) decided by Hon'ble High Court of Karnataka is reproduced

below :-

"2. This appeal has been filed raising the following substantial questions of law:

(1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing oj inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?

(2 Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in. holding that the penalty notice under Section 274 r.w.s. 271(l)(c) is had in law and. invalid inspite the amendment of Section 271(1 B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same?

(3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued, under Section 274 without taking into consideration the assessment order when the assessing officer has specified that the assessee has concealed particulars of income?

6 ITA Nos. 429 & 430/CT K/ 2015 Asse ssment Years: 200 5-0 6 & 2 006 -07 3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. .The Tribunal, while allowing the appeal of the assessee, has relied 01 the derision of the Division Bench of this Court rendered In the case of COMMISSIONER or INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.

prove that the Assessing Officer initiated the penalty proceedings by issuing

the notice u/s 274/271(1)(c) of the Act without specifying whether the

assessee has. concealed ''particulars of income" or assessee has furnished

"inaccurate particulars of income", so as to provide adequate opportunity

to the assessee to explain the show cause notice. Rather notice in this case

has been issued in a stereotyped manner without applying any mind which

is bad in law, hence is not a valid notice sufficient to impose penalty u/s

271(1 )(c) of the Act.

where the assessee has concealed the particulars of income or furnished

inaccurate particulars of such income. It is also a well-accepted proposition

that the aforesaid two limbs of section 271(l)(c) of the Act carry different

meanings. Therefore, it was imperative for the Assessing Officer to strike-

7 ITA Nos. 429 & 430/CT K/ 2015 Asse ssment Years: 200 5-0 6 & 2 006 -07 off the irrelevant limb so as to make the assessee aware as to what is the

charge made against him so that he can respond accordingly. The Hon'ble

Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory,

359 ITR 565 (Kar) observed that the levy of penalty has to be clear as to

the limb under which it is being levied. As per Hon'ble High Court, where

the Assessing Officer proposed to invoke first limb being concealment, then

the notice has to be appropriately marked. The Hon'ble High Court held

that the standard proforma of notice under section 274 of the Act without

striking of the irrelevant clauses would lead to an inference of non-

application of mind by the Assessing Officer. The Hon'ble Supreme Court in

the case of Dilip N. Shroff vs. JCIT, 291 ITR 519(SC) has also noticed that

where the Assessing Officer issues notice under section 274 of the Act in

the standard proforma and the inappropriate words are not deleted, the

same would postulate that the Assessing Officer was not sure as to whether

he was to proceed on the basis that the assessee had concealed the

particulars of his income or furnished inaccurate particulars of income.

According to the Hon'ble Supreme Court, in such a situation, levy of penalty

suffers from non-application of mind. In the background of the aforesaid

legal position and, having regard to the manner in which the Assessing

Officer has issued notice under section 274 r.w.s. 271(l)(c) of the Act dated

13.3.2014 and 31.12.2009 for the assessment year 2005-06 and 2006-07,

respectively, without striking off the irrelevant words, the penalty

proceedings show a non-application of mind by the Assessing Officer and

is, thus, unsustainable. We hold so.

8 ITA Nos. 429 & 430/CT K/ 2015 Asse ssment Years: 200 5-0 6 & 2 006 -07 16. In the result, both the appeals filed by the assessee are allowed.

Order pronounced on 27 /07/2017. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 27 /07/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Sambit Resorts Pvt Ltd., Plot No.339(P), Goutam Nagar, BMC Mausima Main Road, Bhubaneswar. 2. The Respondent. ACIT, Circle -1(2), Bhubaneswar 3. The CIT(A)-1, Bhubaneswar 4. Pr.CIT-1, Bhubaneswar 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack