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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI H. S. SIDHU & SHRI PRASHANT MAHARISHI
Date of Hearing on : 10/03/2016 Order Pronounced on : 04/04/2016
ORDER
PER H.S. SIDHU, JM
This Appeal is filed by the Assessee against the Order dated 24.2.2015 passed by the Ld. CIT(A), Meerut relating to Assessment Year 2004-05 on the following grounds:-
“1. That the penalty of Rs 3,90,400/- has been wrongly and illegally sustained by the Ld. Commissioner Of Income Tax (Appeals).
That the assessee had challenged the satisfaction of the AO herself in the body of the penalty order as she had passed the impugned order on the basis of the order passed by the CIT(A) 'In Limine" in the quantum appeal. Whereas the Ld. Commissioner of Income Tax (Appeals) mistook it in para 3.4
(AY 2004-05) of his order, to be the AO's initial satisfaction in the quantum assessment order. To that extent the ground of appeal remains un-adjudicated.
3. That the final order from the CIT(A) in respect of the disposal of the quantum appeal was passed on 15-03-2010 and must have been received by the assessee as well as the AO much later thereafter, however the penalty order was hurriedly passed on 23-03-2010 and hence there was no occasion for the assessee to reply to any penalty proceedings or bring any cogent evidence in support thereof as the Ld. Assessing officer failed to give to the assessee a reasonable opportunity and neither has disclosed any reasons for invoking the impugned penalty proceedings. In the background of the above facts the Ld. CIT(A) has erred in not accepting additional evidence U/r 46A submitted by the assessee.”
2. The brief facts of the case are that Assessee filed return of income on 26.9.2004 and assessment was completed on 27.12.2006 at assessed income of Rs. 13,05,491/- after making addition of Rs. 11,97,891/- and penalty proceedings u/s. 271(1)(c) were initiated. The assessee filed appeal against the order of the AO before the Ld. CIT(A), who dismissed the appeal in liminie vide his appeal order dated 3.3.2009 in Appeal NO. 420/06-07. The assessee was issued show cause notice u/s. 271(1)(c) dated 5.3.2010, whereby opportunity of being heard against the penalty u/s. 271(1)(c) was afforded to the assessee. In response to the notice, Assessee filed its written submissions. Thereafter, the AO levied a penalty of Rs. 3,90,400/- u/s. 271(1)(c) of the I.T. Act, 1961 vide order 23.3.2010.
3. Against the above Penalty Order dated 23.3.2010 passed by the Assessing Officer, assessee appealed before the Ld. First Appellate 2
(AY 2004-05) Authority, who vide impugned order dated 24.2.2015 dismissed the appeal of the assessee.
Against the above order of the Ld. CIT(A) dated 24.2.2015, assessee is in appeal before the Tribunal.
During the hearing Ld. Counsel of the assessee stated that there is no proper or valid initiation of penalty proceedings by the AO in her Penalty Order. He also submitted that the AO has not at all mentioned that the exact nature of the error on the part of the assessee viz. whether it is a case of furnishing of inaccurate particulars of income or it is of concealment of income. He further submitted that it is well settled law that the assessment proceedings and penalty proceedings are separate and distinct as held by the Hon’ble Supreme Court in the case of Anatharam Veerasinghaiah & Co. vs. CIT 123 ITR 457. He further submitted that condition for imposition of penalty u/s 271(1)(c) of the Act is formation of opinion and recording of satisfaction before conclusion of the proceedings and not at the time of issuance of notice or intimation of penalty proceedings. Whereas in the present case, the Assessing Officer did not record his satisfaction for initiating penalty proceedings in the assessment order. In support of this contention he placed reliance upon the decision in the case of New Sorathia Engineering Co. V/s CIT(2006) 282 ITR 642 (Guj)
Ld. Departmental Representative controverted the arguments advanced by the Ld. Counsel of the assessee and he relied upon the orders of the revenue authorities.
We have heard both the counsels and perused the orders passed by the Revenue authorities. For the sake of convenience, we are reproducing the para no. 5 & 7 at page no. 1 and 2 of the Penalty order as under:-
(AY 2004-05) “Therefore, the contention of the assessee is not acceptable as the Ld. CIT(A) had already dismissed the appeal of the assessee vide his order dated 3.3.2009. The Ld. CIT(A) has not recalled his order dismissing the appeal of the assessee, thereby meaning that no appeal is pending before the Ld. CIT(A) for adjudication. During the course of assessment proceedings, the assessee failed to substantiate the liability of Rs. 6,27,634/- shown as creditors and Rs. 4,60,581/- shown as Advances from Customers. In absence of the same, it is established that the assessee has concealed particulars of its income and furnished inaccurate particulars of income by claiming bogus liabilities in the Return of Income, for which penalty u/s. 271(1)(c) is attracted.
In the given facts and circumstances of the case and conduct of the assessee of non-cooperation during the course of assessment proceedings and non – appearance in the appellate proceedings, and later on, filing application for recall of the appellate order on false grounds that the notices were wrongly served for a different AY, a clear cut case of not only furnishing inaccurate particulars of income and concealment before the Revenue Authorities is made, but at the same time, also misleading the Ld. CIT(A) and AO. In this background, I, consider it appropriate to levy a penalty of 100% of the tax sought to be evaded, i.e. Rs. 3,90,400/- u/s. 271(1)(c). Issue Notice of demand. Inform accordingly.”
(AY 2004-05) 7.1 We find that Ld. AO vide her Penalty order 23.3.2010 at page no. 2 vide para 5 has the words 'furnishing inaccurate particulars of income' refer to the particulars which have been furnished by an assessee of his income and the requirements of concealment of income is that income has not been declared at all or is not even recorded in the books of accounts. The two phrases are altogether different in meaning and sense and therefore the penalty imposed in the present case deserved to be deleted. We also find considerable cogency in the reliance placed by the Ld. Counsel of the Assessee in the case of New Sorathia Engineering Co. V/s CIT(2006) 282 ITR 642 (Guj) wherein, it was held that the order of the penalty must state whether it is levied for concealment of Income or for furnishing inaccurate particulars by the assessee. In absence of such clear cut finding, the order of penalty could not be sustained and accordingly it was held invalid. We further find that at the threshold condition for imposition of penalty u/s 271(1)(c) of the Act is formation of opinion and recording of satisfaction before conclusion of the proceedings and not at the time of issuance of notice or intimation of penalty proceedings. Whereas in the present case, the Assessing Authority did not record his satisfaction for initiating penalty proceedings in the assessment order. In this regard, we place reliance in the case of Dilip N. Shroff Vis JCIT, Mumbai & Anr, 291 ITR (SC) 519.
In the background of the aforesaid discussions, respectfully following the precedents, as aforesaid we are of the view that the levy of penalty in this case is not justified. Accordingly, we quash the orders of the authorities below and delete the levy of penalty of Rs. 3,90,400/- passed u/s. 271(1)(c) of the I.T. Act, 1961 by the AO and confirmed by the Ld. CIT(A).
(AY 2004-05) 9. In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 04/04/2016.