M/s. Honeywell Automation India Limited, Pune V. Deputy Commissioner of Income tax, Pune

ITA 290/PUN/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6863 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 06-02-2017
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM / ITA NO. 290/PUN/2017 / ASSESSMENT YEAR : 2006-07 M/S. HONEYWELL AUTOMATION INDIA LIMITED. 56 & 57, HADAPSAR INDUSTRIAL ESTATE, HADAPSAR, PUNE-411 013. PAN : AAACT3904F ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11, PUNE. / RESPONDENT ASSESSEE BY : SHRI PRAMOD ACHUTHAN REVENUE BY : SHRI ABHIJIT HALDAR / DATE OF HEARING : 28.02.2019 / DATE OF PRONOUNCEMENT : 28.02.2019 / ORDER PER PARTHA SARATHI CHAUDHURY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM TH E ORDER OF LD. CIT(APPEALS)-1, PUNE DATED 24.10.2016 FOR THE ASSESSMENT YEAR 2006-07 AS PER GROUNDS OF APPEAL ON RECORD. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THE LEVY OF PEN ALTY BY THE LD. ASSESSING OFFICER U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 (HE REINAFTER 2 ITA NO. 290/PUN/2017 A.Y.2006-07 REFERRED TO AS THE ACT) WITHOUT RECORDING SATISFACTION O N THE PENALTY IMPOSED AND WITHOUT SPECIFYING THE LIMB FOR WHICH PENALTY HAS BEEN IMPOSED. 3. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE INV ITED OUR ATTENTION TO THE ASSESSMENT ORDER AT PARA 3.2 WHERE THE ASSESS ING OFFICER WRITES ISSUE SHOW CAUSE NOTICE U/S.271(1)(C) IN RESPECT OF ADJUSTMENT T O THE ARMS LENGTH PRICE. THEREAFTER, IN PARA 4 WITH REGARD TO PROVISION NOT ADDED BACK, THE ASSESSING OFFICER ADDS THE AMOUNT OF RS.1,72,00,000/- SINCE D ISPUTE RESOLUTION PANEL (DRP) HAS CONFIRMED THE SAID ADDITION. HEREIN ALSO, NO SATISFACTION OF PENALTY PROCEEDINGS WAS RECORDED BY THE A SSESSING OFFICER. THE LD. AR REFERRED TO THE PENALTY ORDER AND DEMONSTRATED THAT IN THE SAID PENALTY ORDER, THE ASSESSING OFFICER SOMETIMES WISHES TO IMP OSE PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME BY THE ASSESSE E. SOMETIMES HE WANTS TO IMPOSE PENALTY FOR CONCEALMENT OF INCOME BY TH E ASSESSEE. MEANING THEREBY, HE IS NOT SURE ABOUT WHICH SPECIFIC LIMB OF S ECTION 271(1)(C), PENALTY HAS TO BE LEVIED. THE LD. AR THEREFORE, REFERRED TO THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS .405 & 407/PUN/2016 WHEREIN EXACTLY ON THE SAME FACTS AND IS SUE, RELIEF WAS PROVIDED TO THE ASSESSEE BY PLACING RELIANCE ON THE JUDG MENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMSON PERINCHERY REPORTE D AS 392 ITR 4 (BOM). 4. THE LD. DR, PER CONTRA, HAS PLACED RELIANCE ON THE ORD ER OF THE SUB- ORDINATE AUTHORITIES. 5. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE R IVAL CONTENTIONS AND HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE DOCUMENTS ON RECORDS. WE OBSERVE THAT FIRST OF ALL IN THE ASSESSMENT ORDER, NO SATISFACTION HA S BEEN RECORDED BY 3 ITA NO. 290/PUN/2017 A.Y.2006-07 THE ASSESSING OFFICER REGARDING IMPOSITION OF PENALTY U/S.271 (1)(C) OF THE ACT. THAT IN THE PENALTY ORDER, THE ASSESSING OFFICER IS NOT CLE AR AS TO WHICH LIMBS OF SECTION 271(1)(C) OF THE ACT PENALTY TO BE IMPOSED . SOMET IMES, HE IS REFERRING FOR FURNISHING INACCURATE PARTICULARS OF INCOME WH ILE AT TIMES, HE IS IMPOSING PENALTY FOR CONCEALMENT OF INCOME. THIS EXERCISE IS NOT PERMITTED WITHIN THE AMBIT OF INCOME TAX LAW AS OBSERVED IN OUR DECISION IN ASSESSEES OWN CASE IN ITA NO. 405 TO 407/PUN/2016 (SU PRA.). THAT ON THE ISSUE, THE PUNE BENCH OF THE TRIBUNAL HAS HELD AS FOLLOWS: 31.. IT IS SETTLED LAW THAT WHILE LEVYING PENALTY FOR CONCEALING OF PARTICULARS OF INCOME, THE AO HAS TO RECORD SATISFA CTION AND THEREAFTER COME TO A FINDING IN RESPECT OF ONE OF THE LIMBS WHI CH IS SPECIFIED UNDER SECTION 271(1)(C) OF THE ACT. THE FIRST STEP IS TO RECORD SATISFACTION WHILE COMPLETING THE ASSESSMENT AS TO WHETHER THE ASSESSE E HAD CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. THEREAFTER, NOTICE U/S. 274 R.W.S 271(1)(C) OF THE ACT IS TO BE ISSUED TO THE ASSESSEE. THE ASSESSING OFFICER THEREAFTER, HAS TO LEVY PENALTY U NDER SECTION 271(1)(C) OF THE ACT FOR NON SATISFACTION OF EITHER OF THE LI MBS. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HAS TO COME TO A FINDING AS TO WHETHER THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE HON'BLE BOMBAY HIGH COUR T IN CIT VS. SAMSON PERINCHERY (SUPRA.) HELD THAT WHERE INITIATION OF P ENALTY IS ONE LIMB AND THE LEVY OF PENALTY IS ON OTHER LIMB, THEN IN THE A BSENCE OF PROPER SHOW CAUSE NOTICE TO THE ASSESSEE, THERE IS NO MERIT IN LEVY OF PENALTY. 32. CONSIDERING THE FACTS OF THE PRESENT CASE IN TH E LIGHT OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF SAMSON PER INCHERY (SUPRA), WE ARE OF THE VIEW THAT IN THE PRESENT CASE, THE BASIC CONDITION FOR LEVY OF PENALTY HAS NOT BEEN FULFILLED AND THAT THE PENALTY ORDER SUFFERS FROM NON-EXERCISING OF JURISDICTION POWER AND THEREFORE PENALTY ORDER CANNOT BE UPHELD. WE ACCORDINGLY SET ASIDE THE PENALTY ORD ER PASSED BY AO. THUS, THE GROUND OF ASSESSEE IS ALLOWED. 6. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMSON PERINCHERY (SUPRA.) HAS HELD THAT THE SATISFACTION OF THE A SSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDE R 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 PENALTY HAS BEEN IN ITIATED/NOTICE ISSUED. IT MUST, THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY 4 ITA NO. 290/PUN/2017 A.Y.2006-07 ON THE GROUND OF WHICH THE PENALTY PROCEEDINGS HAS BEE N INITIATED AND IT CANNOT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAS NO NOTICE. IN THIS CASE THE HON'BLE BOMBAY HIGH COURT ACCEPTED THE VIEW OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATH COTTON AND GINNING FACTORY REPORTED AS 359 ITR 565 WHEREIN THE HON'BLE KARNATAKA HIGH COURT HAS CATEGORICALLY HELD THAT THE ASSESSING OFFICER WHILE ISSUING N OTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME O R A CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE HON'BLE APEX COU RT IN THE CASE OF ASHOK PAI VS. CIT REPORTED AS 292 ITR 11 HAS H ELD THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME IN SECTION 271(1) (C) OF THE ACT CARRY DIFFERENT MEANINGS/CONNOTATIONS. THE H ON'BLE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED AS 1 22 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING P. LTD. REP ORTED IN 171 TAXMAN 156 HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS N OT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE T HE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MA RKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ST ANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERE NCE AS TO NON APPLICATION OF MIND. 7. THAT THE POSITION OF LAW IS VERY CLEAR AS PER AFORESAID JUDICIAL PRONOUNCEMENTS THAT BEFORE IMPOSING PENALTY U/S.271(1)(C), TH E ASSESSING OFFICER SHOULD SATISFY HIMSELF REGARDING THE REASONS FOR WHICH HE IS IMPOSING PENALTY AND THE SAME REASONS SHOULD BE REFLECTED IN THE NOTICE ISSUED TO THE ASSESSEE SO THAT HE CAN BE READY WITH HIS DEFENSE AND STATEMENT OF FACTS. ANY AMBIGUITY IN THE PROCESS IS NOT WARRANTED WITHIN THE SCOP E OF INCOME TAX 5 ITA NO. 290/PUN/2017 A.Y.2006-07 LAW. WITH THESE OBSERVATIONS, WE DIRECT THE ASSESSING OFFI CER TO CANCEL THE PENALTY IN THE CASE OF ASSESSEE AND WE THEREBY ALLOW THE APPEAL. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 28 TH DAY OF FEBRUARY, 2019. SD/- SD/- ANIL CHATURVEDI PA RTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 28 TH FEBRUARY, 2019. SB !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-1, PUNE. 4. THE PR. CIT-4, PUNE. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, B BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 6 ITA NO. 290/PUN/2017 A.Y.2006-07 DATE 1 DRAFT DICTATED ON 28 .0 2 .2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 28 .0 2 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER