SRI HARJIT SINGH SALL,KOLKATA vs. ITO,WD-50(3), KOLKATA, KOLKATA

This appeal by the assessee is directed against the order dated 11-01-2016 passed by the Commissioner of Income Tax(Appeals)-15, Kolkata for the assessment year 2008-09, wherein he confirmed the penalty of Rs.5,04,710/- imposed u/s. 271(1) ( c) of the Act.

1. For that the order of the Ld. C.I.T(A) is arbitrary, illegal, excessive, perverse and bad in law.

2. For that the Ld CIT(A) erred in confirming the penalty when no specific charge of either concealment or submissions of inaccurate particulars was made. 3. For that the Ld. C.I.T(A) erred in confirming penalty under sec. 271(1)(c) when there was no concealment, the facts and figures with regard to the computation were duly disclosed in the accounts. 4. For that the Ld. C.I.T(A) erred in confirming the penalty simply because the assessee's claim for agricultural income was not accepted even though the land holding of the assessee was accepted. Sri Harjit Singh Sall 1

5. For that on the facts and circumstances of the case the penalty confirmed is unjustified, not in accordance with law and is liable to be cancelled.

6. For that the order of the Ld. C.I.T(A) be modified and the assessee be given relief prayed for. 7. For that the assessee craves leave to add, alter or amend any ground before or at the time of hearing.

3. Going by the above grounds, the only issue remains for our consideration is as to whether the CIT-A right in confirming the penalty imposed by the AO u/section 271(1)(c) of the Act in the facts and circumstances of the case.

6. As aggrieved by such order of the AO in imposing the impugned penalty u/s. 271(1)(c) of the Act, the assessee challenged the same before the CIT(A). Before him the assessee contended that the AO accepted the Assessee is the owner of the agricultural land and failed to strike off the irrelevant part in notice u/section 274 and relied on the decisions specifically to say the initiation of penalty proceedings are not maintainable is reproduced herein below:

The AR of the assessee filed written submission on 08/01/2006 during the appellate proceedings and contended inter-alia as under:- a. That the ownership of land of the assessee was accepted by the AO, hence he should have also accepted the agricultural income earned out of it. b. There is no specific charge mentioned in the showcause notice for penalty dated 29/12/2010 issued u/s 274 of the Act. The AO has not struck out the irrelevant part. c. On the basis of following judgments, the penalty order is legal and is liable to be quashed.

I have carefully gone through the submissions of the AR of the assessee but I am not convinced. The case laws relied upon by him are also not applicable in the instance case. The AO has mentioned in the assessment that the assessee could not produce any evidence regarding earning agricultural income as claimed in his return. Ownership of agricultural land cannot mean that the assessee was earning agriculture income in the absence of purchase and sale bills and documents regarding expenses incurred. The AR of the assessee admitted during the appellate proceedings also that such documents are not available with him. Hence, the AO had given a categorical finding in the assessment order that the assessee had furnished inaccurate particulars of income, and for which penalty proceedings u/s 271 (I)(c) was initiated. It is a fact that the copy of penalty notice issued u/s 274 did not strike out irrelevant portion. However, the judgment of Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory reported in 359 ITR 565 envisages that the existence of conditions stipulated under section 271 (1)( c) should be discernible from the assessment order. As mentioned above this fact is clearly borne out from the assessment order. Thus, the ground that penalty proceedings was initiated on one account and levied on another account is not correct. Various judgments cited by the AR of the assessee pointed out that the specific finding regard existence of the conditions mentioned in section 271 (1)( c) should be discernible either from the assessment order or the penalty notice which would constitute the basis of initiating the penalty proceedings. The explanation given by the assessee during the assessment proceeding was held to be not bona fide and acceptable has been mentioned clearly in the assessment order itself. In the penalty proceedings, the AO gave a fresh opportunity to the assessee for submitting fresh explanations/evidences but there was no compliance on the part of the assessee. The AR has also mentioned that while calculating the penalty amount at the end of the penalty order, the AO has mentioned in the penalty order as under:- "Tax on total income (including the concealed income of Rs. 5,04,707/- income of Rs.15, 40, 370/- on which penalty is applicable." Thus. the AR argued that the AO had initiated tile penalty on one ground i.e. "furnishing inaccurate particulars of income" and levied the penalty on another ground i.e. "Concealment" which is legally not correct. This contention of the AR cannot be accepted. It is clearly written in the operative part of the penalty order that penalty is levied for furnishing inaccurate particulars of income. Thus, the AR is trying to take advantage of small technical things which are not permissible under the Act. In view of the forgoing discussion, it is held that the penalty was rightly levied for furnishing inaccurate particular of income by the AO and is thus confirmed.

and contended that the AO initiated penalty proceedings on both the charges as mentioned in the notice issued u/s.274 of the Act. The Ld. AR argued Sri Harjit Singh Sall 4 that the penalty cannot be imposed for furnishing of inaccurate particulars without mentioning the specific charge of offence committed by the assessee i.e whether he has concealed the income or furnished inaccurate particulars of income and relied on the same decisions as submitted before the CIT-A and placed on record at pages 2 to 61 in paper book . The Ld.AR referred page no’s-62, 63 of the paper book regarding the order of the Co-ordinate Bench, A Bench, Kolkata dated 04-05-2016 in assessee’s own case in ITA No. 1237/Kol/2013 for the AY 2008-09. He argued that the Tribunal restricted the agriculture income at Rs.10,00,000/- on estimation and penalty cannot be imposed on the basis of estimation and relied on the decisions in the cases of Hari Gopal reported in 258 ITR

85. (P&H), Ravail Singh reported in 254 ITR 191 (P&H) and Sangrur Vanaspati Mills Ltd reported in 303 ITR

53. (P&H) for such proposition and placed on record at page 64 of the paper book.

9. On the contrary, the Ld.DR submits that the assessee could not produce any explanation either in assessment proceedings or penalty proceedings before the AO and relied on the orders of the authorities below.

10. Heard both and perused the material available on record. We find that the Ld.AR advanced two fold arguments before us i.e one placing reliance on the decision of Hon’ble High Court of Karnataka regarding the defective notice and two the penalty was imposed on estimated addition and placed reliance on the decisions supra. We find that the Tribunal has given relief of Rs. 10 lakhs in the assessee’s appeal filed against u/s. 143(3) of the Act. It is noticed from such order of the Tribunal that the claim of the assessee showing agricultural income at Rs.15,40,370/- is excessive and, therefore, restricted to Rs.10,00,000/-. With regard to contention of charging and imposing of penalty as mentioned in the said notice issued u/s. 274 of the Act the, fact remains admitted that the AO ticked only the portion of furnishing of inaccurate particulars of such income. Therefore, the ratio of decision as laid down by the Hon’ble High Court of Karnataka in the case of Manjunatha Cotton & Ginning Factory reported in 359 ITR 565(Kar) is not applicable to the facts of the instant case.

11. With regard to the submissions that the penalty cannot be imposed on income based on estimation, the Ld. AR referred to the three decisions supra and we may examine the decision in the case of Sangrur Vanaspati Mills Ltd reported in 303 ITR 53 (P&H). The facts therein, the addition had been made by the AO by estimating the sales outside the books of account. The CIT(A) estimated the yield and worked out the additional production, on this estimated additional production and applied average sale rate and worked out the additional sale at Rs. 15,50,306 which was rounded off to Rs. 15,50,000 and added to the income of the assessee. The Tribunal also estimated the yield on the basis of preceding year and the addition made by the learned CIT(A) had been sustained. The Hon’ble High Court held that there should be conclusive evidence that the assessee had concealed the particulars of income or furnished inaccurate particulars of income for levying the penalty and the relevant portion of which is reproduced herein below:

The order passed by the Tribunal is based upon two decisions of this Court in CIT vs. Ravail Singh & Co. (2002) 173 CTR (P&H) 429 : (2002) 254 ITR 191 (P&H) and Harigopal Singh vs. CIT (2002) 177 CTR (P&H) 580 : (2002) 258 ITR 85 (P&H). In both these decisions, this Court has held that in order to attract cl. (c) of s. 271(1) of the Act, it is necessary that there must be concealment by the assessee of the particulars of his income or furnishing of inaccurate particulars of such income. The provisions of s. 271(1)(c) of the Act are not attracted to cases where the income of an assessee is assessed on estimate basis and additions are made therein. It was held that when the addition had been made on the basis of estimate and not on account of any concrete evidence of concealment, then the penalty was not leviable. The similar view was also taken by this Court in CIT vs. Dhillon Rice Mills (2002) 256 ITR 447 (P&H), where the addition was made by the AO by estimating the yield of super phak as well as of chhilka and also the price of chhilka, that addition was reduced by the CIT(A). However, the penalty levied by the AO was deleted by the CIT(A). The order of CIT(A) was confirmed by the Tribunal and the appeal filed by the Revenue against the said order of the Tribunal was dismissed by this Court, on the ground that the AO had made the Sri Harjit Singh Sall 6 additions on the basis of estimate of the yield of phak and chhilka and an estimate of the price and that the estimate would not ipso facto lead to penalty. 7. In view of the aforesaid factual and legal position, we are of the opinion that no substantial question of law is arising from the order passed by the Tribunal. Dismissed