Shaila Pralhad Choudhary, Nashik V. Income tax Officer,

ITA 2858/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8582 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 16-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISHEK MESHR AM
• Keywords: Principle of natural justice; Initiation of penalty proceedings; Reasonable cause
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.2857 & 2858/PUN/2016 / ASSESSMENT YEARS : 2009-10 & 2010-11 SHAILA P. CHOUDHARY, SHRI KRISHNA BUNGLOW, KADLAG MALA, GANGAPUR ROAD, NASHIK 422 005 PAN : ACUPC4342D ....... / APPELLANT / V/S. ITO, CENTRAL-1, NASHIK / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI ABHISHEK MESHRAM / DATE OF HEARING : 01-01-2019 / DATE OF PRONOUNCEMENT : 02-01-2019 / ORDER PER VIKAS AWASTHY, JM : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-12, PUNE DATED 09-09-2016 COMMON FOR THE ASSESSMENT YEARS 2009-10 & 2010-11, CONFIRMING LEVY OF PENALTY U/S.271(1)(C) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) 2. SHRI PRAMOD SHINGTE APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED AT THE OUTSET THAT PENALTY ORDER IS LIABLE TO D ISMISSED ON THE 2 ITA NOS. 2857 & 2858/PUN/2016 SHAILA PRALHAD CHOUDHARY LEGAL GROUND OF AMBIGUITY IN MENTIONING OF CHARGE U/S.27(1)(C) OF THE ACT WHILE RECORDING SATISFACTION FOR LEVY OF PENALTY. THE LD . AR REFERRED TO THE ASSESSMENT ORDER DATED 08-01-2014 FO R THE A.Y. 2009- 10 AND POINTED THAT PENALTY WAS INITIATED BY THE AO IN RE SPECT OF TWO ADDITIONS, I.E. (1) ADDITIONAL INCOME OFFERED IN RETURN OF INCOME IN RESPONSE TO NOTICE U/S.153A RS.3,110/-; AND (2) UNEXPLAINED CAPITAL RS.2,00,000/-. THE LD. AR POINTED THAT THE AO WHILE RECORDIN G SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS IN RESPECT O F ADDITIONAL CAPITAL INTRODUCED HAS NOT SPECIFIED THE CHARGE U/S.271(1)(C) FOR WHICH PENALTY IS TO BE LEVIED. AS REGARDS ADDITION OF RS.3,110/-, THE AO WHILE RECORDING SATISFACTION MENTIONED THAT PENALTY IS BEING LEVIED FOR CONCEALMENT. HOWEVER, WHILE PASSING THE ORDER LEVYING PENA LTY DATED 23-05-2014, THE AO IN PARA 8 OF ORDER MENTIONED THAT A SSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND THEREBY C ONCEALED HER INCOME TO THE EXTENT OF RS.2,03,110/- WHICH INCLUDES BOTH THE ADDITIONS. THE MANNER IN WHICH SATISFACTION HAS BEEN RECOR DED FOR INITIATING PENALTY AND THEREAFTER THE MANNER IN WHICH PENALT Y IS LEVIED IS CONTRARY TO THE LAW LAID DOWN IN THE CASE OF CIT VS. SA MSON PERINCHERY 392 ITR 4 (BOM.) AND CIT & ANOTHER VS. MANJUN ATHA COTTON AND GINNING FACTORY 359 ITR 565 (KARN.). 3. THE LD. AR SUBMITTED THAT, SIMILARLY FOR THE A.Y. 2010-11, THE AO IN ASSESSMENT ORDER DATED 08-01-2014 U/S.143(3) R.W.S 15 3A HAS INITIATED PENALTY PROCEEDINGS IN RESPECT OF ADDITION OF UNDISC LOSED INTEREST RECEIPTS RS.64,983/- AND UNDISCLOSED INVESTMENT RS.2,20,000/- WITHOUT SPECIFYING THE CHARGE FOR INITIATING PE NALTY PROCEEDINGS U/S.271(1)(C). WHILE PASSING ORDER LEVYING PENALTY DATED 23-05-2014, THE AO IN PARA 9 OF THE ORDER HAS MENTIONED BOTH THE 3 ITA NOS. 2857 & 2858/PUN/2016 SHAILA PRALHAD CHOUDHARY LIMBS OF SECTION 271(1)(C). THE MANNER OF RECORDING SATISFACTIO N AND THE LEVY OF PENALTY U/S.271(1)(C) IS CONTRARY TO THE LAW LAID D OWN IN THE CASE OF CIT VS. SAMSON PERINCHERY (SUPRA) AND MANJUNATH A COTTON & GINNING FACTORY (SUPRA). 4. ON THE OTHER HAND, SHRI ABHISHEK MESHRAM REPRESENT ING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED FOR DISMISSING THE APPEALS OF ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTAT IVE OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW FO R THE ASSESSMENT YEARS UNDER APPEAL, I.E. A.YRS. 2009-10 AND 201 0-11. THE ASSESSEE HAS CHALLENGED LEVY OF PENALTY U/S.271(1)(C) R.W. EXP LANATION 5A ON THE LEGAL ISSUE OF RECORDING OF SATISFACTION FOR INITIATI NG PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT WITHOUT CLEARLY MENTION ING THE CHARGE. A.Y. 2009-10 : 6. A PERUSAL OF THE ASSESSMENT ORDER FOR A.Y. 2009-10 SH OWS THAT PENALTY PROCEEDINGS HAVE BEEN INITIATED IN RESPECT OF TWO ADDITIONS. THE FIRST ADDITION IS RS.3,110/- ON ACCOUNT OF ADDITIONAL INCOM E DECLARED IN RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/ S.153A. THE AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) R.W. EXPLANATION 5A AND HAS MENTIONED THAT THE PENALTY PROCEEDINGS FOR CONCEALIN G THE PARTICULARS OF INCOME. HOWEVER, AT THE TIME OF LEVY OF PENA LTY, THE AO IN PARA 8 MENTIONED BOTH THE LIMBS OF SECTION 271(1)(C), I.E. FU RNISHED INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOM E. THE RELEVANT EXTRACT OF THE FINDINGS OF AO IN PENALTY ORDER READS AS UNDER : 4 ITA NOS. 2857 & 2858/PUN/2016 SHAILA PRALHAD CHOUDHARY 8. I AM SATISFIED THAT THE ASSESSEE HAS WITHOUT ANY REASONABLE CAUSE, FURNISHED AN INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALED HER INCOME TO THE EXTENT OF RS.2,03,110/- WHICH COMPRISES OF ADDITION OF RS.2,00,000/- ON A/C OF CAPITAL INTRODUCTION AND RS.3,110/- ON A/C OF AD MITTANCE OF ADDITIONAL INCOME. 7. THE SECOND ADDITION IN A.Y. 2009-10 FOR WHICH PENALTY IS INITIATED IS RS.2 LAKHS ON ACCOUNT OF UNEXPLAINED CAPITAL. WH ILE INITIATING PENALTY, THE AO HAS NOT SPECIFIED ANY OF THE CHARG E U/S.271(1)(C). HOWEVER, WHILE PASSING THE ORDER LEVYING PENALTY , THE AO HAS MENTIONED BOTH THE LIMBS. THE RELEVANT EXTRACT OF PENALTY ORDER (PARA NO.8) HAS ALREADY BEEN REPRODUCED HEREINABOVE. 8. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANOTHER VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HELD TH AT THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEE T SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS NO PENALTY COULD BE IMPOSED ON THE ASS ESSEE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMSON PERINCHERY (SUPRA) APPROVED THE JUDGMENT IN THE CASE CIT & ANOTHE R VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) AND HELD AS UNDER : 6. THE ABOVE SUBMISSION ON THE PART OF THE REVENUE IS IN THE FACE OF THE DECISION OF THE SUPREME COURT IN ASHOK P AI V/S CIT 292 ITR 11 (RELIED UPON IN MANJUNATH COTTON & GINNING FACTORY (SUPRA) WHEREIN IT IS OBSERVED THAT CONCEALMENT OF I NCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME IN S ECTION 271(1)(C) OF THE ACT, CARRY DIFFERENT MEANINGS/CONNOTATIONS. T HEREFORE, THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SECTION 271(1)(C) OF THE ACT, FOR INITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT/PERMIT PENALTY BEING IMPOSED FOR THE OTHER BREACH. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPOND TO THE GROUND ON WHICH THE PENA LTY HAS BEEN INITIATED/NOTICE ISSUED. IT MUST, THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUN D OF WHICH THE PENALTY PROCEEDINGS HAS BEEN INITIATED, AND IT CANNOT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAS NO NOTICE. 5 ITA NOS. 2857 & 2858/PUN/2016 SHAILA PRALHAD CHOUDHARY THUS, IN VIEW OF THE FACT THAT IN THE ASSESSMENT YEAR UND ER APPEAL THE MANNER OF INITIATION OF PENALTY PROCEEDINGS AND THEREAFTER LEVY OF PENALTY IS CONTRARY TO THE LAW LAID DOWN BY THE HONBLE J URISDICTIONAL HIGH COURT, THE PENALTY PROCEEDINGS ARE VITIATED AND THE PENALTY ORDER DATED 23-05-2014 IS HELD TO BE INVALID. ACCORDINGLY, THE A PPEAL OF THE ASSESSEE FOR A.Y. 2009-10 IS ALLOWED. A.Y. 2010-11 : 9. A PERUSAL OF THE ASSESSMENT ORDER FOR A.Y. 2010-11 SH OWS THAT THE PENALTY PROCEEDINGS HAVE BEEN INITIATED U/S.271(1)(C) IN RESPECT OF TWO ADDITIONS, I.E. (1) UNDISCLOSED INVESTMENT RS.2,20,000/-, AND (2) UNDISCLOSED INTEREST RECEIPTS RS.64,983/-. THE AO WHILE REC ORDING SATISFACTION FOR INITIATION OF PENALTY QUA ABOVE ADDITIONS HAS NOT MENTIONED ANY OF THE LIMBS/CHARGE OF SECTION 271(1)(C). THE A O HAS MERELY RECORDED PENALTY PROCEEDINGS U/S.271(1)(1) IS SEPARATELY INITIATED . THE AO HAS FAILED TO SPECIFY THE CHARGE U/S.271(1)(1), I.E. WHETHER THE PENALTY PROCEEDINGS ARE INITIATED FOR CONCEA LMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THUS, AMBIG UITY IN RECORDING SATISFACTION IS EVIDENT WRIT LARGE FROM THE ASSESS MENT ORDER. THE AO WHILE PASSING ORDER LEVYING PENALTY DATED 23-05-20 14 HAS MENTIONED BOTH THE LIMBS OF SECTION 271(1)(C) OF THE ACT. RELE VANT EXTRACT OF PARA NO.9 OF THE PENALTY ORDER WHERE THE AO HAS MENTIONED THE CHARGES FOR LEVY OF PENALTY READ AS UNDER : 9. I AM SATISFIED THAT THE ASSESSEE HAS WITHOUT ANY REASONABLE CAUSE, FURNISHED AN INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALED HER INCOME TO THE EXTENT OF RS.3,30,793/- WHICH COMPRISES OF ADDITION OF RS.2,20,000/- ON A/C OF UNDISCLOSED INVESTMENT IN FDR, RS.64,983/- ON ACCO UNT OF 6 ITA NOS. 2857 & 2858/PUN/2016 SHAILA PRALHAD CHOUDHARY UNDISCLOSED INTEREST RECEIPT AND RS.45,810/- ON A/C OF ADMITTANCE OF ADDITIONAL INCOME. 10. A PERUSAL OF THE PENALTY ORDER SHOWS THAT AO HAS M ENTIONED BOTH THE CHARGES FOR LEVY OF PENALTY. THUS, THE MANNER OF RECORDING SATISFACTION FOR INITIATION AND LEVY OF PENALTY IS CONTRARY TO THE LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SAMSON PERINCHERY (SUPRA). A PERUSAL OF ASSESSMENT ORDER AND PENALTY ORDER INDICATES THAT THE ASSESSING OFFICER WAS NO T CLEAR IN HIS MIND WHETHER THE PENALTY IS TO BE LEVIED FOR CONCEALMENT O R FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. THE ASSESSING OFFICER IS ABSOLUTELY SILENT ABOUT THE CHARGE U/S.271(1)(C) AT THE TIME OF RECORDING SATISFACTION AND THEREAFTER MENTIONED BOTH THE LIMBS OF SECTION 271(1)(C) AT THE TIME OF PASSING ORDER LEVYING PENALTY . IN THE LIGHT OF THE FACTS OF THE CASE AS DISCUSSED ABOVE, THE PEN ALTY PROCEEDINGS ARE LIABLE TO SET ASIDE. WE HOLD AND DIRECT ACCORDINGLY. 11. IN THE RESULT, THE IMPUGNED ORDER FOR A.Y. 2009-10 A ND 2010-11 IS QUASHED AND THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 02 ND DAY OF JANUARY, 2019. SD/- SD/- (D. KARUNAKARA RAO) (VIKAS AWASTHY) ACCOUNTANT MEMBER JU DICIAL MEMBER / PUNE; / DATED : 02 ND JANUARY, 2019 SATISH 7 ITA NOS. 2857 & 2858/PUN/2016 SHAILA PRALHAD CHOUDHARY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)-12, PUNE 4. / THE PR.CIT CENTRAL, NAGPUR 5. , , $ , / DR, ITAT, A BENCH, PUNE. 6. ' / GUARD FILE. // // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY, , / ITAT, PUNE 8 ITA NOS. 2857 & 2858/PUN/2016 SHAILA PRALHAD CHOUDHARY DATE 1. DRAFT DICTATED ON 01-01-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 01-01-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER.