Shri Kalpesh Kantilal Patel, Ahmedabad V. The DCIT, Central Circle- 2(4), Ahmedabad

ITA 1094/AHD/2019

AI Insights

The case involves Shri Kalpesh Kantilal Patel, who appealed against the penalty levied by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, following the disallowance of certain deductions and bad debts claimed in his income tax return for the assessment year 2006-07. The primary contention in the appeal was the lack of specific satisfaction recorded by the Assessing Officer regarding the nature of the penalty. The ITAT noted that the penalty was imposed without clear indication of whether it was for concealment of income or for furnishing inaccurate particulars, which is essential as per various judicial precedents. The Tribunal also considered the procedural history, including the dismissal of the assessee's earlier appeals due to non-appearance rather than on merits, and the fact that similar deductions had been allowed in previous years.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125627 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-06-2023
• Assessment Year: 2006-2007
• Appeal Filed On: 27-06-2019
• Other Referred Cases: CIT Vs. Reliance Petroproducts (P) Ltd., PCIT vs. Sahara India Life Insurance Company Ltd., CIT vs. SSA'S Emerald Meadows, PCIT v. Golden Peace Hotels and Resorts (P.) Ltd., Goa Dourado Promotions (P.) Ltd., PCIT v. Goa Coastal Resorts and Recreation (P.) Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings; Wrong claim; Bad and doubtful debts
• Section: 271(1)(c); 143(3); 14A; 80IB; 274; 254(2); 113; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER& SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I. T .A . N o .1 09 4 / Ah d/2 0 1 9 ( A s se ss m e nt Y e a r : 20 06- 0 7 ) Sh r i K a lp es h K a n t il al Pa te l C / o. K a m al S h a n ti, Nr . S a r da r P at e l Un de r B r i dg e, S ar d a r Pa te l C o lo n y, Na r an pu r a , Ah me da bad V s. D C IT C e n tr al C ir cle - 2 ( 4 ) , A h m e da ba d [ P AN N o. A A WP P5 0 5 4D ] (Appellant) .. (Respondent) Appellant by : Shri M. S. Chhajed, A.R. Respondent by: Shri Aashish Rajesh Revar, Sr. D.R. D a t e of H ea r i ng 07.06.2023 D a t e of P r o no u n ce me nt 09.06.2023 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-12,(in short “Ld. CIT(A)”) Ahmedabad, in Appeal No. CIT(A)-12/25/CC2(4)/2017-18 vide order dated 25.09.2018 upholding the levy of penalty under Section 271(1)(c) of the Act passed for Assessment Year 2006-07. 2. The assessee has taken the following grounds of appeals:- “1. The order passed by the Ld. CIT(A) is against law, equity & justice. 2. The Ld. CIT(A) has erred in law and/or facts in upholding order of Ld. A.O. of levy penalty of Rs.3,77,590/- U/S 271(1)(c) of the Act. ITA No. 1094/Ahd/2019 Shri Kalpesh Kantilal Patel vs. DCIT Asst.Year –2006-07 - 2 - 3. The appellant Craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal.” 3. The brief facts of the case are that the assessee filed return of income on 31.12.2006 showing total income of Rs. 6,91,760/- after claiming deduction under Section 80-IB of the Act of Rs. 9,11,765/-. In the assessment order passed under Section 143(3) of the Act, the Assessing Officer made additions on account of disallowance of deduction claimed under Section 80-IB(10) (Rs. 9,11,765/-), disallowance of bad debts (Rs.1,43,718/-) and disallowance under Section 14A of the Act (Rs. 33,444/-). 4. In the quantum appeal before CIT(Appeals), he partly allowed the appeal of the assessee and granted relief of Rs. 13,904/- on account of disallowance under Section 14A of the Act. However, he confirmed the additions made on account of disallowance of deduction under Section 80- IB(10) of Rs. 9,11,765/- and disallowance of bad debt of Rs. 1,43,718/-. The assessee approached the ITAT against the order passed by Ld. CIT(Appeals) and the ITAT vide order dated 06.06.2016 dismissed the appeal of the assessee for non-appearance. Thereafter, penalty proceedings were initiated by the Assessing Officer and he imposed penalty under Section 271(1)(c) of the Act @ 100% of the tax sought to be evaded, with the following observation:- “In view of the above, the ratio of the decision laid down by the Hon'ble supreme court in the case of CIT Vs. Reliance Petroproducts (P) Ltd. is ITA No. 1094/Ahd/2019 Shri Kalpesh Kantilal Patel vs. DCIT Asst.Year –2006-07 - 3 - not applicable in the case of this assessee as there is clear out findings given in the assessment order itself. 8. The Ld. CIT(A) has also upheld the assessment order on basis of both facts and merit of the case that the AO was justified in making the disallowances. Hence, the AO has rightly established that the Assessee had willfully tried to made wrong claim u/s 80IB and bad debts in order to evade tax. I am therefore satisfied that the Assessee has willfully tried to furnish in accurate particulars and thereby concealed his income with the express purpose of evasion of tax. 9. In view of the above facts, I am satisfied that the assessee has furnished inaccurate particulars leading to concealment of income in respect of commission charged for providing accommodation entries. Therefore, the assessee is liable for penalty u/s 271(1)(c) of the Act. Hence, I levy penalty u/s 271(1)(c) rws 274 of the Act @ 100% of the tax sought to be evaded.” 5. The assessee filed appeal against the penalty order before Ld. CIT(Appeals), who dismissed the appeal of the assessee with the following observations:- “There is no denying the fact that the additions made by the AO to the total income of the appellant on which the penalty has been imposed has been upheld by the CIT(A) and appellant's appeal dismissed by the Hon'ble ITAT. Even if the appellant's appeal was dismissed by the ITAT on account of non-appearance of the appellant, it is also noted that the appellant has not bothered to approach the Hon'ble Tribunal ITA No. 1094/Ahd/2019 Shri Kalpesh Kantilal Patel vs. DCIT Asst.Year –2006-07 - 4 - u/s 254(2) implying thereby that there is no basis in the appellant's contention that it has been getting deduction u/s 80IB in the years prior to and following the AY 2006-07. There is no controversy on the fact that the additions made by the AO to the total income of the appellant has stood before the appellate authorities and that it is bounden duty of a tax payer that it computes the total income correctly as per the provisions of Income Tax Act and files the return of income truly and correctly. The appellant has clearly failed on these counts. Though I must agree in principle with the appellant's submission that mere addition to the total income arid confirmation of said addition by the appellate authorities do not make the penalty imposable necessarily and automatically, but the AO in the impugned penalty order has made out a case of furnishing inaccurate particulars of income taking into account the submission made by the appellant before him. I am of the considered view that a tax payer can make wrong claim of deductions and of expenses and argue in its defense that it had disclosed the particulars of income correctly. A true disclosure must be reflected in correct self computation of income and in opposing the orders if any authority has held otherwise. Thus the relevant ground of appeal is required to be dismissed. 6.1 In the facts and the circumstances of the case I find no basis to interfere with the penalty order being impugned by the appellant. 7. The appeal is dismissed.” 6. The assessee is in appeal before us against the aforesaid order passed by the Ld. CIT(Appeals) upholding levy of penalty u/s penalty u/s 271(1)(c) ITA No. 1094/Ahd/2019 Shri Kalpesh Kantilal Patel vs. DCIT Asst.Year –2006-07 - 5 - of the Act. The first contention of the Counsel for the assessee before us is that the ITAT in the previous years and up to A.Y. 2005-06 had allowed the assessee’s claim for deduction under Section 80-IB(10) of the Act, on similar set of facts. Further, even for the impugned assessment year under consideration, the ITAT did not dismiss the case of the assessee on merits, but assessee’s appeal was dismissed on account of non-appearance before ITAT. He further submitted that the aforesaid order passed by Hon’ble ITAT came to the knowledge of the assessee after a period of over one year, by which time the assessee could not file Appeal or Miscellaneous Application against the order of Hon’ble ITAT, since the same was time barred. Accordingly, it is not the case where assessee’s appeal was dismissed by Hon’ble ITAT on merits, but the appeal was dismissed only on account of non-appearance, and therefore, there is no case for levy of penalty under Section 271(1)(c) of the Act. In support of the above contention, the Counsel for the assessee drew our attention to Pages 31 to 34 of the Paper Book i.e. ITAT’s order in assessee’s own case for A.Y. 2006-07. The second legal contention raised by the assessee is that in the assessment order, no satisfaction whatsoever has been recorded by the Assessing Officer whether the penalty is being levied for concealment of income or for furnishing of inaccurate particulars of income. The Ld. Counsel for the assessee further drew our attention to page 15 of Paper- Book i.e. show cause notice issued u/s 271(1)(c) of the Act and submitted that even in the above show cause notice, no satisfaction has been recorded and there is no mention whether penalty proceedings have been initiated for furnishing of inaccurate particulars of income or for concealment of income. Therefore, the Counsel for the assessee submitted that it is well settled law ITA No. 1094/Ahd/2019 Shri Kalpesh Kantilal Patel vs. DCIT Asst.Year –2006-07 - 6 - that recording of satisfaction is a pre-requisite before initiation of penalty under Section 271(1)(c) of the Act and since, in the instant case, no such satisfaction was recorded by the Assessing Officer either in the body of the assessment order or in the show cause notice issued u/s. 271(1)(c) of the Act, the levy of penalty under Section 271(1)(c) itself is bad in law. 7. In response, the Ld. D.R. placed reliance on the observations made by the Ld. Assessing Officer and Ld. CIT(A), in their respective orders. 8. We have heard the rival contentions and perused materials on record. Before going into the merits of levy of penalty, we shall first deal with the legal contention raised by the Counsel for the assessee with respect to non- recording of satisfaction before initiating the penalty proceedings u/s. 271(1)(c) of the Act. In the case of PCIT vs. Sahara India Life Insurance Company Ltd. 432 ITR 84 (Delhi), the Delhi High Court held that imposition of penalty under Section 271(1)(c) without specifying the limb i.e. whether the penalty is being imposed for concealment of particulars of income or for furnishing of inaccurate particulars of income, was not justified. In the case of CIT vs. SSA’S Emerald Meadows 73 taxmann.com 241 (Karnataka), the Karnataka High Court held that the Tribunal, allowed the appeal of the assessee holding that notice issued under Section 274 r.w.s. 271(1)(c) of the Act was bad in law since the order did not specify under which limb of Section 271(1)(c), penalty proceedings had been initiated, there was no substantial question of law which arose for determination. Notably, the SLP filed by the Department against the aforesaid order was also dismissed by the Hon’ble Supreme Court in the case of CIT vs. SSA’S Emerald Meadows reported in 73 taxmann.com 248 ITA No. 1094/Ahd/2019 Shri Kalpesh Kantilal Patel vs. DCIT Asst.Year –2006-07 - 7 - (SC). In the case of PCIT v. Golden Peace Hotels and Resorts (P.) Ltd. 124 taxmann.com 249 (SC), the Hon'ble Supreme Court dismissed the SLP filed by the Department against High Court ruling that recording of satisfaction by Assessing Officer that there was concealment of income or that any inaccurate particulars were furnished by assessee was sine qua non for initiation of penalty proceedings and in absence of such satisfaction, both Commissioner (Appeals) as well as Tribunal had correctly ordered to drop penalty proceedings against assessee. In the case of Goa Dourado Promotions (P.) Ltd. 113 taxmann.com 630 (Bombay), the Bombay High Court held that recording of satisfaction by Assessing Officer in relation to concealment of income or furnishing of inaccurate particulars by assessee in notice issued for initiation of penalty proceedings under section 271(1)(c) is sine qua non for initiation of such proceedings. In the case of PCIT v. Goa Coastal Resorts and Recreation (P.) Ltd. 113 taxmann.com 574 (Bombay), the Bombay High Court held that where there was no recording of satisfaction by Assessing Officer in relation to any concealment of income or furnishing of inaccurate particulars by assessee in notice issued for initiation of penalty proceedings under section 271(1)(c), same being sine qua non for initiation of such proceedings, Tribunal had rightly ordered to drop penalty proceedings. Notably, the SLP filed by the Department was dismissed by the Hon'ble Supreme Court as reported in [2021] 130 taxmann.com 379 (SC). 9. Accordingly, we observe that since in the instant case no specific satisfaction has been recorded by the Ld. Assessing Officer either in the body of the assessment order or in the show cause notice issued u/s ITA No. 1094/Ahd/2019 Shri Kalpesh Kantilal Patel vs. DCIT Asst.Year –2006-07 - 8 - 271(1)(c) of the Act dated 02.05.2017 for initiation of penalty proceedings, respectfully following the decisions cited above, the penalty imposed on the assessee under section 271(1)(c) is directed to be set-aside. 10. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 09/06/2023 Sd/- Sd/- (ANIL CHATURVEDI) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 09/06/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 07.06.2023 2. Date on which the typed draft is placed before the Dictating Member 07.06.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 07.06.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .06.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 09.06.2023 7. Date on which the file goes to the Bench Clerk 09.06.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................