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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI Before Sh. N. K. Saini, AM And Sh. Vijay Pal Rao, JM Asstt. Year : 2008-09 SVP Builders (India) Ltd., Vs Deputy Commissioner of Income 17, Kiran Enclave, G.T. Road, Tax, Circle-7(1), Ghaziabad New Delhi (APPELLANT) (RESPONDENT) PAN No. AAECS8870M Assessee by : Sh. Salil Aggarwal & Shailesh Gupta, Advs. Revenue by : Sh. Amrapalli Das, CIT DR Date of Hearing : 21.12.2015 Date of Pronouncement : 22.12.2015 ORDER PER N. K. Saini, AM:
This is an appeal by the assessee against the order dated 18.07.2014 of ld. ld. CIT(A)-X, Delhi.
Following grounds have been raised in this appeal:
“1. That the learned CIT(A) has erred both on facts and in law in upholding the order imposing the penalty u/s 271(1)(c) of the Income Tax Act, though partially; whereas the order impugned before him was not sustainable. 2. That the learned CIT(A) has failed to comprehend that, the addition made of Rs.39,40,500/- did not represent the concealed income of the assessee, which sum alone was not the basis for the initiation of the proceedings. Thus in the absence of any satisfaction 2 SVP Builders (India) Ltd. having been reached in respect of the aforesaid sum, no penalty could have either been imposed or sustained.
That the learned CIT(A) has also failed to comprehend that, the proceedings u/s 271(1)(c) of the Act were initiated by the AO in respect of the concealed income of the assessee aggregating to Rs.3,50,00,000/- and not in respect of the amount of Rs.39,40,500/- in respect where of the assessee had furnished explanation which was merely held unsatisfactory and thus no satisfaction having been recorded in respect of such an amount, no penalty could have been imposed.
4. That the learned CIT(A) has completely overlooked that the amount of Rs.39,40,500/- did not either represent “concealed income” and no proceedings having been initiated in respect thereof, on the ground that the assessee has furnished any inaccurate particulars (in respect of the such an amount of Rs.39,40,500/-), no penalty was either leviable or sustainable. Thus no penalty could have been imposed or sustained in respect of a sum of Rs.39,40,500/- which was neither a concealed income nor in respect of which proceedings were initiated by the AO while initiating the proceedings u/s 271(1)(c) of the Act.
That the learned CIT(A) has failed to appreciate that, the learned AO had proceeded to initiate proceedings in respect of a sum of Rs.3,50,00,000/- which in his opinion represented concealed income and thus after the said sum having been deleted by the Tribunal, no penalty could have been sustained at all.
3 SVP Builders (India) Ltd.
6. That in any case and without prejudice, even the sum of Rs.39,40,500/- did not represent such a sum on which any penalty u/s 271(1)(c) of the Act could have been imposed, since it was admitted by the AO in the order of assessment that the Explanation given by the assessee was not satisfactory. Thus in the absence of any satisfaction in the course of assessment proceedings no penalty could have been sustained in respect of a sum of R.39,40,500/-. It is thus prayed that the order of leaned CIT(A) upholding the levy of penalty in respect of Rs.39,40,500/- be held as not sustainable and in any and without prejudice no penalty was leviable in respect thereof and thus such a penalty imposed and sustained by the CIT(A) be directed to be deleted.”
3. The only grievance of the assessee in this appeal relates to the sustenance of penalty levied by the AO u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act) on the addition of Rs.39,40,500/-.
Facts of the case in brief are that the assessee filed the return of income on 12.03.2010 declaring an income of Rs.3,05,49,620/-. The assessment, however, was framed at an income of Rs.6,94,90,120/- by making the addition of Rs.3,50,00,000/- shown by the assessee as share application money and cash payments amounting to Rs.39,40,500/-. The addition of Rs.3,50,00,000/- was deleted by the ITAT, however, the another additions of Rs.39,40,500/- was confirmed. The AO levied the 4 SVP Builders (India) Ltd. penalty on the addition of Rs.3,89,40,500/-. Accordingly, the penalty of Rs.1,32,35,875/- was levied u/s 271(1)(c) of the Act.
5. Being aggrieved the assessee carried the matter to the ld. CIT(A) who deleted the penalty in respect of addition of Rs.3,50,00,000/-, since the said addition had been deleted by the ITAT vide order dated 29.04.2014 in ITA No. 4243/Del/2012. However, the penalty in respect of the addition of Rs.39,40,500/- was sustained.
Now the assessee is in appeal. The ld. Counsel for the assessee submitted that no penalty proceedings u/s 271(1)(c) of the Act was initiated in respect of the addition of Rs.39,40,500/-. He drew our attention towards the last page of the assessment order dated 30.12.2010. It we emphasized that the AO considered the addition of Rs.3,50,00,000/- as concealed income of the assessee and also initiated the penalty proceedings u/s 271(1)(c) of the Act in respect of the said concealed income only. However, the income of Rs.39,40,500/- was although treated as income of the assessee but nowhere it was mentioned that the penalty proceedings were initiated in respect of the said addition. Accordingly, it was submitted that the penalty levied u/s 271(1)(c) of the Act and sustained by the ld. CIT(A) on the addition of Rs.39,40,500/- was not justified. The reliance was placed on the following case laws:
5 SVP Builders (India) Ltd. � CIT Vs Triveni Engineering and Industries Ltd. (2014) 369 ITR 660 (All) � CIT Vs Lotus Constructions (2015) 370 ITR 475 (T & AP) And the order dated 29.04.2014 of the ITAT Delhi Bench ‘G’, New Delhi in to 4249/Del/2012 for the assessment years 2003-04 to 2008-09 in assessee’s own case.
In her rival submissions the ld. CIT DR strongly supported the orders of the authorities below and further submitted that the addition of Rs.39,40,500/- made by the AO was confirmed by the ITAT which proved for the said amount was concealed income of the assessee. Therefore, the penalty u/s 271(1)(c) of the Act was rightly levied by the AO and sustained by the ld. CIT(A).
We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that the AO made the addition of Rs.3.50 crores on account of share application contribution and Rs.39,40,500/- on account of cash payments for which satisfactory reply was not given by the assessee. However, the AO considered the amount of Rs.3.50 crores as concealed income of the assessee and initiated the penalty proceedings u/s 271(1)(c) of the Act in respect of concealed income only, which is evident from the observations of the AO in last page of the assessment order dated 30.12.2010 which read as under:
6 SVP Builders (India) Ltd. “This is a calculative move to give these sham transactions the color of genuineness. Therefore, in view of above observation, circumstances and facts of the case, the amount of Rs.3,50,00,000/- shown as share application money is treated as assessee’s own unexplained cash receipts introduced into the account in the garb of share application contributions. The amount of Rs.3,50,00,000/- is accordingly represents the concealed income of the assessee. Other issues:- During search operation a document annexure A-1 containing 89 loose papers was found in which there are cash payment amounting to Rs.39,40,500/- during the year. The assessee was required to explain the same vide notice u/s 142(1) dated 25.10.2010. The assessee submitted its argument vide letter dated 12.12.2010. The assessee’s reply on the issue is not satisfactory; therefore, the same is treated as income of the assessee. Addition: Rs.39,40,500/- With these remarks the Income of the assessee is computed as under:- ITEM AMOUNT(RS.) Income/Loss from Business or Profession 3,05,49,620/- Add: 1) Concealed Income as discussed 3,50,00,000/- above. 2) addition on cash payment as discussed 39,40,500/- above Total 6,94,90,120/- Assessed at total income of Rs.6,94,90,120/- 7 SVP Builders (India) Ltd. This order is passed after obtaining prior approval from the Ld. Addl.CIT(Central Range), Meerut, vide letter F.No.Addl.CIT(CR)/MRT/S&S/Scrutiny/2010-11/461 dated 30.12.2010. Interest being charged as per law. Give credit for paid taxes. Issue necessary forms. Penalty proceedings u/s 271(1)(c) of the IT Act is being initiated separately in respect of its concealed income as discussed above.”
From the above notings of the AO in the assessment order dated 30.12.2010 it is crystal clear that the penalty proceedings u/s 271(1)(c) of the Act were initiated in respect of concealed income only and the amount of Rs.3.50 crores was considered as concealed income and not the amount of Rs.39,40,500/- which although was treated as income of the assessee but nowhere it is stated that the said income was concealed income of the assessee. On a similar issue the Hon’ble Andhra Pradesh High Court in the case of CIT Vs Lotus Constructions (supra) held as under:
“Basically section 271(1) of the Income-tax Act, 1961, itself indicates that the satisfaction or decision to initiate proceedings must arise in the course of the proceedings. Added to that, sub-section (1B) of section 271 mandates that the intention or satisfaction to initiate proceedings must be evident from the order of assessment itself, meaning thereby that such satisfaction need not be supported with other reasons. The absence of any mention in the order of assessment that proceedings under section 271(1)(c) would be initiated makes the initiation of such proceedings, untenable. The nature of satisfaction need not be in writing, though the factum of satisfaction must be in writing.”
8 SVP Builders (India) Ltd. 10. In the said case since there was no satisfaction in the order of the assessment to the effect that penalty proceedings u/s 271(1)(c) of the Act would be initiated, therefore, the order of the ITAT in deleting the penalty u/s 271(1)(c) of the Act was confirmed.
Similarly the Hon’ble Allahabad High Court in the case of CIT Vs Triveni Engineering and Industries Ltd. (supra) held as under:
“Section 271(1)(c) of the Income-tax Act, 1961, empowers, inter alia, the Assessing Officer, where he is satisfied in the course of any proceedings under the Act that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income, to direct the payment of penalty. Under sub-section (1B), inserted with effect from April 1, 1989, such satisfaction is deemed. In order for the deeming fiction in sub-section (1B) to apply, two requirements must be fulfilled. The first requirement is that an amount must have been added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment. The second is that the order of assessment or reassessment must contain a direction for the initiation of penalty proceedings under clause (c) of sub-section (1) of section 271.” It has been further held that:
“From the assessment order for the assessment year 2000-01 it was abundantly clear that in respect of those heads where the Assessing Officer considered it appropriate to initiate penalty proceedings under section 271(1)(c), he had made a specific direction to that effect. In respect of the claim of interest on the sugar development fund loan, there was no 9 SVP Builders (India) Ltd. direction by the Assessing Officer. The absence of a reference to the initiation of proceedings under section 271(1)(c) was not an inadvertent omission since it was clear that in respect of several other heads, when the Assessing Officer did consider it appropriate to initiate penalty proceedings, he had made an observation to that effect. In fact, even in the concluding part of his order, the Assessing Officer issued a direction for initiating penalty notice under section 271(1)(c) “as discussed above”. The expression “as discussed above” is material because it refers to those heads in respect of which a specific direction was issued by him for initiating steps under section 271(1)(c). The Tribunal was justified in deleting the penalty under section 271(1)(c) in respect of the sugar development fund loan.”
In the present case also the AO initiated the penalty proceedings only in respect of addition of Rs.3.50 crores which has been deleted by the ITAT but there was no initiation of penalty proceedings u/s 271(1)(c) of the Act in respect of the addition of Rs.39,40,500/-. Therefore, the penalty levied by the AO on the said addition and sustained by the ld. CIT(A) was not justified. In that view of the matter impugned penalty is deleted.