Assistant Commissioner of Income-tax, V. The Beed District Central Co.op. Bank Ltd.,

ITA 2138/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7207 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-11-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 03-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Initiation of penalty proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO , AM AND SHRI VIKAS AWASTHY, JM . / I TA NO. 2138 /PUN/20 14 / ASSESSMENT YEAR : 2008 - 09 THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 2 , AURANGABAD . ... ....... / APPELLANT / V/S. THE BEED DIST. CENTRAL CO - OP. BANK LTD. RAJURI VES. BEED - 431 515 PAN : AAAAT5256C . / RESPONDENT A SSESSEE BY : SMT. DEEPA KHARE REVENUE BY : SHRI RAJEEV KUMAR, CIT REVENUE BY : SHRI RAJEEV KUMAR, CIT / DATE OF HEARING : 15.11.2017 / DATE OF PRONOUNCEMENT : 17 .11.2017 / ORDER PER VIKAS AWASTHY, JM THIS APPEAL BY DEPARTMENT IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD DATED 30.09.2014 FOR THE ASSESSMENT YEAR 2008 - 09. THE DEPARTMENT IN APPEAL HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE PENALTY LEVIED U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) IN RESPECT OF DISALLOWANCE OF RS.7,43,75,000/ - IN ASSESSMENT . 2 ITA NO.2138 /PUN/2014 A.Y. 2008 - 09 2. THE ASSESSEE HAS FILED AN APPLICATION UNDER RULE 27 OF INCOME TAX APPELLATE TRIBUNAL RULES , 1963. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS UNDER RULE 27 CHALLENGING THE LEVY OF PENALTY. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE NOTICE FOR LEVY OF PENALTY WAS DEFECTIVE IN AS MUCH AS NO SPECIFIC CHARGE TOWARDS EITHER CONCEALING THE PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WAS MADE OUT IN THE NOT ICE AND WHETHER THE PENALTY WAS LEVIED ON ANY SPECIFIC CHARGE AS REQUIRED UNDER THE LAW. 2. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LEARNED AO HAS RECORDED SATISFACTION BEFORE INITIATION OF PENALTY AS REQUIRED UNDER THE LAW. 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE: THE ASSESSEE IS A CO - OPERATIVE BANK REGISTERED UNDER S ECTION 14 OF HYDERABAD CO - OPERATIVE SOCIETY ACT, XVI, 1952. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE CE RTAIN ADDITION S / ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE CE RTAIN ADDITION S / DISALLOWANCE S WHICH INTER ALIA INCLUDE DISALLOWANCE OF P ROVISION FOR STATUTORY RESERVE F UND RS. 7,43,75,000/ - . AFTER HAVING UNSUCCESSFUL ATTEMPT BEFORE FIRST APPELLATE AUTHORITY, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TRIBUNAL. ASSESSEE RAISED VARIOUS GROUNDS IN SECOND APPEAL CHALLENGING THE ADDITIONS INCLUDING DISALLOWANCE OF PROVISION FOR STATUTORY RESERVE FUND, BUT DID NOT PRESS THE GROUND RAISED AGAINST AFORESAID ADDITION. PENALTY PROCEEDINGS U/S. 271(1) (C) WERE INITIATED IN RESPECT OF THE ADDITION OF RS.7,43,75,000/ - . THE ASSESSING OFFICER VIDE ORDER DATED 22.03.2013 LEVIED PENALTY OF RS.8,19,63,177/ - U/S. 271(1) (C) IN RESPECT OF DISALLO WANCE/ADDITION UNDER DISPUTE. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) D ELETED THE PENALTY ON MERIT S . AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), THE DEPARTMENT IS NOW IN APPEAL 3 ITA NO.2138 /PUN/2014 A.Y. 2008 - 09 BEFORE TRIBUNAL. THE ASSESSEE HAS RAISED LEGAL GROUND CHALLENGING THE LEVY OF PENALTY UNDER RULE 27. 4. SMT. DEEPA KHARE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT A PERUSAL OF ASSESSMENT ORDER WOULD SHOW THAT PENALT Y PROCEEDINGS U/S. 271(1)(C) HAVE BEEN INITIATED IN RESPECT OF DISALLOWANCE FOR FURNISHING INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. THE ASSESSING OFFICER WHILE INITIATING PENALTY HAS MENTIONED BOTH THE LIMBS. THEREAFTER, WHILE ISSUING NOTICE U/S. 274 R.W.S 271(1)(C), AGAIN THE ASSESSING OFFICER HAS NOT STR UCK OF F IRRELEVANT LIMB AND BOTH LIMBS I.E. CONCEAL ED THE PARTICULARS O F INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME HAVE BEEN MENTIONED. THE LD. COUNSEL FOR THE ASSESSEE POINTED THAT WHILE LEVYING PENALTY, THE ASSESSING OFFICER HAS NOT MENTIONED ANY OF THE LIMBS AND HAS MERELY STATED THAT THE ASSESSEE HAS MADE ITSEL F LIABLE FOR LEVYING PENALTY U/S. 271(1) (C) OF THE ACT. THE OBSERVATION S OF ASSESSING OFFICER WHILE U/S. 271(1) (C) OF THE ACT. THE OBSERVATION S OF ASSESSING OFFICER WHILE INITIATING PENALTY PROCEEDINGS AND AT THE TIME OF LEVYING PENALTY CLEARLY INDICATE THAT THERE WAS AMBIGUITY IN THE MIND OF ASSESSING OFFICER WHILE RECORDIN G SATISFACTION AS WELL AS , WHILE LEVYING PENALTY. WHERE THERE IS AMBIGUITY IN THE MIND OF ASSESSING OFFICER, ORDER LEVYING PENALTY IS NOT SUSTAINABLE. IN SUPPORT OF HER SUBMISSIONS, THE LD. COUNSEL PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) THE COMMIS SIONER OF INCOME TAX - 11 VS. SHRI SAMSON PERINCHERY REPORTED AS 392 ITR 4. II) ANAND SATISHKUMAR BHUTADA VS. THE INCOME TAX OFFICER IN ITA NO. 1756/PUN/2014 DECIDED ON 03.05.2017. III) KANHAIYALAL D. JAIN VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, IN ITA NOS.1201 - 1205/PN/2014 DECIDED ON 30.11.2016. IV) THE NAMPUR BRIHAT VIVIDH VS. THE INCOME TAX OFFICER IN ITA NO. 1533/PUN/2015 DECIDED ON 31.07.2017. 4 ITA NO.2138 /PUN/2014 A.Y. 2008 - 09 5. ON THE OTHER HAND, SHRI RAJEEV KUMAR REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER LEVYIN G PENALTY U/S. 271(1) (C) OF THE ACT. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED PENALTY ON MERITS , AGAINST WHICH THE DEPARTMENT IS IN APPEAL BEFORE TRIBUNAL. THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS CHALLENGING THE NOTICE FOR LEVY OF PENALTY , AS WELL AS , MANNER OF RECORDING SATISFACTION FOR LEVYING PENALTY. A PERUSAL OF THE ASSESSMENT ORDER DATED 30.12.2010 REVEALS THAT ASSESSING OFFICER WHILE RECORDING SATISFACTION FOR INITIATING PENALTY PROCEEDINGS, HAS MENTIONED BOTH THE LIMBS OF SECTION 271(1)(C) I.E. CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IN ASSESSMENT ORDER B OTH THE LIMBS OF SECTION 271(1)(C) OF THE ACT HAVE BEEN MENTIONED ORDER B OTH THE LIMBS OF SECTION 271(1)(C) OF THE ACT HAVE BEEN MENTIONED WITH CONJUNCTION OR . THUS, IT IS APPARENT THAT ASSESSING OFFICER WAS NOT HAVING CLARITY AS TO UNDER WHICH LIMB OF SECTION 271(1)(C), PENALTY HAS TO BE LEVIED. SIMILAR AMBIGUITY PERSISTS EVEN AT THE TIME OF ISSUANCE OF NOTICE U/S. 274 R.W.S. 271(1)(C) OF THE ACT. THE ASSESSING OFFICER HAS NOT STRUCK OF F IRRELEVANT LIMB AND HAS NOT SPECIFIED THE CHARGE FOR WHICH PENALTY HAS TO BE LEVIED. A FURTHER PERUSAL OF THE ORDER DATED 22.03.2013 LEVYING PENALTY U/S. 271(1) (C) SHOWS THAT ASSESSING OFFICER HAS NOT MENTIONED AT ALL ANY OF THE CHARGE /LIMB FOR WHICH PENALTY HAS BEEN LEVIED. THE RELEVANT EXTRACT OF THE ORDER LEVYING PENALTY U /S. 271(1) (C) IS REPRODUCED HEREIN BELOW : IN VIEW OF THE FAC TS MENTIONED ABOVE, AND AS THE CLAIMS OF DEDUCTION MADE BY THE ASSESSEE BANK REGARDING PROVISIONS FOR STATUTORY RESERVE FUND AND PROVISION FOR OVERDUE INTEREST WHICH WERE NOT ONLY INCORRECT IN LAW BUT WAS ALSO WHOLLY WITHOUT ANY BASIS AND 5 ITA NO.2138 /PUN/2014 A.Y. 2008 - 09 EXPLANATION, HENC E I AM SATISFIED THAT THE ASSESSEE BANK HAS MADE ITSELF LIABLE FOR LEVY OF PENALTY UNDER SECTION 271(1) (C) OF THE ACT. THUS, FROM A BARE READING OF SATISFACTION AND ORDER LEVYING PENALTY, EXISTENCE OF AMBIGUITY AND CONFUSION IN THE MIND OF ASSESSING OFFICER IS CLEARLY EVIDENT. 7. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATH COTTON AND GINNING FACTORY REPORTED AS 359 ITR 656 HAS HELD THAT EXISTENCE OF CONDITIO NS STIPULATED IN SECTION 271(1) (C) IS A SINE - QUA - NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 OF THE ACT . THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUT HORITY. THE HONBLE COURT FURTHER HELD THAT THE ASSESSEE SHOULD KNOW THE GROUNDS WHIC H HE HAS TO MEET SPECIFICALLY, O THERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. 8. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI SAMSON PERINCHERY (SUPRA) HAS HELD THAT ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND FOR WHICH THE PENALTY PROCEEDINGS HAVE BEEN INITIATED, AND IT CANNOT BE ON A FRESH GROUND OF WHI CH THE ASSESSEE HAS NO NOTICE. IN THE INSTANT CASE, WE FIND THAT WHILE INITIATING PENALTY, THE ASSESSING OFFICER HAS MENTIONED BOTH THE LIMBS I.E. CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. BUT AT THE TIME OF PASSING ORDER LEVYIN G PENALTY, THE ASSESSING OFFICER IS SILENT ABOUT THE CHARGE FOR LEVY OF PENALTY . IN SUCH CIRCUMSTANCES, WE ARE OF CONSIDERED VIEW THAT RECORDING OF SATISFACTION , AS WELL AS , ORDER LEVYING PENALTY SUFFER FROM FATAL DEFECT. THEREFORE, THE ORDER LEVYING PENA LTY IS UNSUSTAINABLE BEING BAD IN 6 ITA NO.2138 /PUN/2014 A.Y. 2008 - 09 LAW. ACCORDINGLY, THE GROUNDS RAISED BY ASSESSEE UNDER RULE 27 ARE ALLOWED AND APPEAL OF THE DEPARTMENT IS DISMISSED. 9. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRO NOUNCED ON FRIDAY , THE 17 TH DAY OF NOVEMBER , 201 7 . SD/ - SD/ - ( . / D. KARUNAKARA RAO ) ( /VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 17 TH NOVEMBER , 2017 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS), AURANGABAD. 4. THE PR. CIT - 1, AURANGABAD. 5 . , , , / DR, ITAT, A BENCH, PUNE. / DR, ITAT, A BENCH, PUNE. 6 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE .