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Income Tax Appellate Tribunal, “C”, BENCH KOLKATA
Before: SHRI N.V.VASUDEVAN JM, & DR. A.L.SAINI, AM
O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned three appeals filed by the assessee, pertaining to the assessment years 2004-2005, 2005-06 & 2006-07, are directed against the order passed by the ld. Commissioner of Income Tax (Appeals)-XXIV, Kolkata, in Appeal No.1467, 1468 & 1469/CIT(A)-XXIV/C-17/13-14, all dated 10.02.2014, which in turn arise out of orders made by the AO u/s.271(1)(c) of the Income Tax Act 1961, (hereinafter referred to the ‘Act’), all dated 21.05.2009.
Since these three appeals relate to same assessee, different assessment years and common issues involved, therefore, these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The assessee`s appeal in, is taken as the lead case.
Brief facts of the case qua the assessee are that the assessee is an employee of ICICI prudential Life Insurance Co. Ltd. The assessee receives income from the said company. The income is in two fold, via (i) basic and (ii) commission. The basic is fixed and the commission portion depends on the performance of the appellant. Accordingly in the return of income the appellant has shown the detailed income earned during the year, in the form of salary and commission. The commission income received from ICICI prudential Life Insurance Co. Ltd. thus, was shown under the head business income by the appellant. The Ld. A.O., however, was of the view that the appellant had earned only salary income, based on FORM No. 16, and treated both the salary and commission income under the same head of salary and did not allow the expenses which pertain to earning of commission income.
Further, the assessee has not submitted the details called by the AO, therefore, the AO only considered the details of income as per Form No.16 of the employer ICICI Prudential Life Insurance Company limited, that is, salary income only. Since the assessee has not submitted the copy of agreement in respect of commission received by him and reasonability of expenses claimed by the assessee, therefore, the AO has disallowed this income and expenses and initiated penalty proceedings u/s.271(1)(c) of the Act.
Not being satisfied with the penalty order u/s.271(1)(c) of the Act, the assessee filed an appeal before the CIT(A), who has dismissed the appeal of the assessee observing the followings :-
The present appeal is against the penalty order u/s. 271(1)(c) passed by the A.O. I have carefully perused the grounds of appeal and the penalty order of the A.O. as already discussed above, the appellant has failed to offer any explanation for submission in support of the grounds raised in this appeal nor any supporting evidences were produced by him despite adequate opportunity having been provided. In this connection, reliance may be placed upon the decision of the Hon.ble Supreme Court in the case of H.M. Esufali H. M. Abdulali (1973)
90. ITR 271 wherein the Hon'ble Court has held that the appellate authority cannot substitute its own judgement in place of the judgement of the A.O. unless it is shown that the judgement of the A.O. was biased, irrational, vindictive or capricious. In the instant case the appellant has not able to show that the decision of the A.O. was arbitrary, biased, irrational, vindictive or capricious without any basis. I find no reason to interfere with the decision of the A.O. In the result, appeal filed by the appellant is "dismissed".
5.Not being satisfied with the order of ld. CIT(A), the assessee is in further appeal before us and has taken the following grounds of appeal :-
1. That on the facts and in the circumstances of the case, the Ld. A.O. was not justified in imposing penalty proceedings U/s 271(1)(c) of the Income Tax Act, 1961 and the Ld. CIT(A)- XXVI also unjustifiably confirmed the same without giving proper opportunity to your appellant.
2. That the Ld. CIT(A)-XXVI quiet vehemently and hurriedly passed the appellate order confirming the penalty proceedings U/s. 271(1)(c) of the Income Tax Act, 1961 without giving reasonable opportunity of hearing as well as filing of written submission to your appellant. 3. That the impugned penalty order as well as the impugned appeal order otherwise illogical, torturous, unjustified, bad in law and should be quashed, set aside, rescinded, recalled and /or otherwise nullified, even on sympathetic and/ or humanitarian grounds.
4. That the appellant craves leave to amend, alter, modify, substitute, add to, any or all of the above grounds.
Although in this appeal, the assessee has raised multiple grounds of appeal, but at the time of hearing the solitary grievance of the assessee has been confined to the issue that penalty proceedings initiated by AO U/s 271 (1) ( c) of the Act and confirmed by the CIT (A) is unjustified.
6.1 Ld. AR for the assessee has submitted before us that in these three appeals, the show cause notice U/s. 274 of the Income Tax Act, 1961 issued before imposing the penalty, do not indicate the ground on which penalty is sought to be imposed, i.e. as to whether the assessee is guilty for having concealed particulars of income or of furnishing inaccurate particulars of income. The printed notice does not strike out the irrelevant portion viz 'concealed particulars of such income' or 'furnished inaccurate particulars of income'. Therefore, imposition of penalty under such circumstances is not justified, and bad in law and is liable to be quashed.
Imposition of penalty on the basis of such invalid show cause notice cannot be sustained. Penalty proceeding initiated on one limb and find the assessee guilty in another limb is bad in law. To support his arguments, the ld AR for the assessee has relied on the following judgments:
(1).The ld AR for the assessee relied on the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 218 Taxmann 423 (Kar), wherein it was held that:
“ if show cause notice U/s. 274 of the Act does not specify as to the exact charge viz, whether the charge is that the assessee has "furnished inaccurate particulars of income" or "concealed particulars of income" by striking out the irrelevant portion of the printed show cause notice, than the imposition of penalty on the basis of such invalid show cause notice cannot be sustained.”
(2). The decision of Hon'ble Income Tax Appellate Tribunal, Kolkata Bench, in the case of Mahabir Prasad Agarwal Versus ACIT, Central Circle-XIII, & 739/kol/2013 dated 15.01.2016 wherein it was held that – "For the reasons given above, we hold that levy of penalty in the present case cannot be sustained. We therefore cancel the orders imposing penalty on the Assessee and allow the appeal by the Assessee. In view of our above conclusions on the issue of defect in show cause notice u/s.274 of the Act, we are not dealing with the other arguments made on merits of the orders imposing penalty on the Assesssee. "
(3).The Hon'ble Income Tax Appellate Tribunal, Kolkata Bench, in the case of Shri Santosh Kumar Sikaria Vs. Assistant Commissioner of Income Tax in dated 01.06.2016 wherein a similar issue was dealt on and it was held as - “It is clear from the aforesaid decision that on the facts of the present case that the show cause notice U/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon'ble Kamataka High Court referred above, we hold that that the order imposing penalty has to be held as invalid and consequently penalty imposed is cancelled. In view of the above conclusions we are not dealing with the other aspects on merits of the imposition of penalty.
(4).The Hon'ble Income Tax Appellate Tribunal, Kolkata Bench, in the case of Shri Champalal Jain Vs Income Tax Officer in ITANo. 127/kol/2013 dated 01.06.2015 wherein it was held that – "The AO in this case levied the penalty for both the charges without mentioning any specific charge. In CIT v. Atul Mohan Bindal (2009) 9 SCC 589, where Hon'ble Supreme Court was considering the same provision, it observed that the assessing officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. Thus the satisfaction of the AO about the concealment of particulars of income or furnishing of inaccurate particulars of such income is essential before levying any penalty u/s 271(1) (c). The AO as is apparent from the penalty order has not satisfied about the concealment of particulars of income or furnishing of inaccurate particulars of income on the part of the assessee. On this basis itself the penalty deleted."
The ld AR for the assessee, therefore submitted that the above cited case laws squarely covers up the issue, since the notice U/s. 274 is invalid and thus the penalty order is bad in law, should be deleted and should not be sustained. Thus the demand amounting to Rs. 37,479/- imposing penalty U/s. 271(1)(c) of the Income Tax Act, 1961 is wrong and unjustified and should be deleted.
6.2. Having heard the submissions of ld AR for the assessee, and perused the Notice issued under section 274 /271(1) (c ) of the Act, we noticed that the issue is squarely covered by the judgment of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 218 Taxmann 423 (Kar) (supra). Therefore, we cancel the penalty order u/s.271(1)(c) of the Act, in these three appeals. 6.3. In the result, the appeals filed by the assessee in these three appeals ( & 780/Kol/2014), are allowed. Order pronounced in the open court on this 15/02/2017.