Prafulla Gadge v. Asstt. Commissioner of Income-tax, Central Circle-1(2), Nagpur
[Citation -2016-LL-1013-36]

Citation 2016-LL-1013-36
Appellant Name Prafulla Gadge
Respondent Name Asstt. Commissioner of Income-tax, Central Circle-1(2), Nagpur
Court ITAT-Nagpur
Relevant Act Income-tax
Date of Order 13/10/2016
Assessment Year 2006-07
Judgment View Judgment
Keyword Tags initiation of penalty proceedings • opportunity of being heard • concealment of income • notice for penalty • specific direction • additional ground • interest income • issue of notice • regular return
Bot Summary: Therefore the assessee is liable for penalty u/s 271AAA. Penalty proceedings u/s 271 AAA has been initiated separately. In the penalty order the AO did not make any whisper of penalty u/s 271AAA. However, he levied a penalty of Rs.9,77,163/- u/s 271(1)(c) by invoking Explanation 5A to section 271(1)(c). The assessee appealed before the learned CIT(Appeals) inter alia submitting that the AO has issued notice as well as recorded satisfaction in assessment order regarding initiation of penalty u/s 271AAA, but has levied penalty u/s 271(1)(c). Learned counsel of the assessee submitted that in the assessment order the AO has clearly mentioned his satisfaction that the assessee is liable for penalty u/s 271AAA. For penalty u/s 271(1)(c) he has recorded satisfaction for initiation of penalty only with respect to FDR interest of Rs.24,900/- and bank interest of Rs.5270/-. Referring to the above, learned counsel of the assessee submitted that from the assessment order as well as notice, it is clear that the AO has recorded the satisfaction for issue of notice u/s 271AAA. As against the above the penalty order does not mention any thing about penalty u/s 271AAA. However, penalty has been levied u/s 271(1)(c) amounting to Rs.9,77,163/-. Held, in respect of heads where AO considered it appropriate to initiate penalty proceedings u/s 271(1)(c), he made specific direction to that effect In respect of claim of interest on SDF loan, there was no direction by AO Absence of reference to initiation of proceedings u/s 271(1)(c) was not inadvertent omission Even in concluding part of his order, AO issued direction for initiating penalty notice u/s 271(1)(c) As held by Supreme Court in Mak Data Private Limited vs. CIT, AO had to satisfy himself if penalty proceedings should be initiated or not during course of assessment proceedings and not required to record his 7 ITA No. 246/Nag/2016. Satisfaction in particular manner or reduce it into writing There was no direction whatsoever by AO in respect of specific head of interest on the SDF loan, on which the penalty was deleted by ITAT Omission in case of SDF loan was in sharp contrast to those items where AO specifically directed initiation of penalty proceedings u/s 271(1)(c) ITAT was justified in deleting penalty u/s 271(1)(c) in respect of the SDF loan.


1 ITA No. 246/Nag/2016. IN INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. No. 246/Nag/2016 Assessment Year : 2006-07. Shri Prafulla Gadge, Asstt. Commissioner of Income-tax, Nagpur. Vs. Central Circle-1(2), Nagpur. PAN AEQPG8983G. Appellant. Respondent. Appellant by : Shri Mukesh Agrawal. Respondent by : Shri A.R. Ninawe.. Date of Hearing : 13-10-2016 Date of Pronouncement : 13th Oct., 2016 O R D E R. This appeal by assessee is directed against order of learned CIT(Appeals)-3, Nagpur dated 01-03-2016 and pertains to assessment year 2006-07. grounds of appeal read as under : 1. learned CIT(Appeals) erred in understanding facts of case with respect to penalty proceedings u/s 271AAA and penalty proceedings u/s 271(1)(c). 2. learned CIT(Appeals) erred in confirming penalty under Section 271(1)(c) of Income Tax Act, 1961. assessee has also filed additional ground as under : That ld. CIT(Appeals) has erred in confirming penalty u/s 271(1)(c) of I.T. Act on income of Rs. 26,96,183/- for which neither any satisfaction is recorded by ld. AO in assessment order nor any show cause notice is issued. 2 ITA No. 246/Nag/2016. 2. At outset in this case learned counsel of assessee stated that additional ground has been taken out of abundant caution. He submitted that same relates to non recording of satisfaction for initiation of penalty u/s 271(1)(c). He submitted that subject matter of additional ground has already been raised before learned CIT(Appeals) and he has decided same against assessee. That grounds of appeal raised in main grounds of appeal also cover this aspect. Further learned counsel submitted that this is purely legal issue and on anvil of Hon ble Apex Court decision in case of NTPC Ltd, (229 ITR 383) same may kindly be admitted. 3. Heard learned D.R. 4. Upon careful consideration I find that main grounds of appeal raised by assessee duly encompass matter raised in additional ground and that assessee has out of abundant caution raised this ground. Accepting argument that it is purely legal issue, on anvil of Hon ble Apex Court decision in NTPC Ltd. , I admit same. 5. In this case assessment order was passed as under : _____________________ ____ _ _______________ L _ assessee filed his return of income on 20.12.2006 declaring total income of Rs. 1232460/-. 2. search u/s 132 was carried out at premises of Vas Group of companies, their associated concern as well as directors. residence of assessee was also searched. search operation was started on 23.7.2007 and same was completed on 24.8.2007. assessee is promoter director of Vastu group of companies. 3. Pursuant to search, notice u/s 153A was issued on 15.2.2008. assessee filed return of income in response to notice u/s 153A declaring total income at Rs 4019614/-. 1. 4. Notice u/s 143(2) and 142(1) were issued time to time. Sh Vijay Agarwal CA and Sh Anil Sawalkar CA and Sh Ganesh Chakkarwar Advocate attended time to time and explained case. 5. Subject to above remarks, total income of assessee is computed as under: - 3 ITA No. 246/Nag/2016. (In Rs.) Total income as per return of income. 40,19,610/- Assessed u/s. 143(3) r w s 153A of I.T. Act, 1961. Give / credit to pre paid taxes. Charge interest u/s 234A, 234B, 234C and 2340. Issue demand notice/ refund to assessee. assessee declared Rs 26 6183/- during course of search. Therefore assessee is liable for penalty u/s 271AAA. Penalty proceedings u/s 271 AAA has been initiated separately. assessee did not declare interest income of Rs 24900/- on FOR and bank interest of Rs 5270/- in regular return of income u/s 139. Therefore penalty proceedings u/s 271 (1 )(c) has been initiated separately in respect of interest income now included in return of income in response to notice u/s 153A.. order has been passed with approval of Addl CIT Central Range 1, Nagpur. approval u/s 1530 is received vide letter dated 21.12.2009. 6. Penalty proceedings were accordingly initiated. In penalty order AO did not make any whisper of penalty u/s 271AAA. However, he levied penalty of Rs.9,77,163/- u/s 271(1)(c) by invoking Explanation 5A to section 271(1)(c). 7. assessee appealed before learned CIT(Appeals) inter alia submitting that AO has issued notice as well as recorded satisfaction in assessment order regarding initiation of penalty u/s 271AAA, but has levied penalty u/s 271(1)(c). However, learned CIT(Appeals) did not accept same. He held as under : intention of AO appears to have been to initiate penalty u/s 271(1)(c) for concealed amount of Rs.26,96,183/- though AO has mentioned and initiated same u/s 271AAA. judgments relied upon by assessee are perused considered carefully. judgment in case of Cario International Vs. DCIT is on different issue where Hon ble ITAT has held that provision of section 271AAA lay down that it is only AO who may direct to imposed penalty as envisaged whereas provisions of section 271(1) stipulate that AO or Commissioner (Appeals) or Commissioner can proceed to impose penalty u/s 271(1)(c). Hon ble ITAT has held that there is clear distinction between two provisions. In fact, going by decision of 4 ITA No. 246/Nag/2016. Hon ble ITAT, CIT(A) can take decision on initiation of penalty u/s 271(1)(c). On merits, learned CIT(Appeals) confirmed penalty levied. 8. Against above order, assessee is in appeal before ITAT. 9. I have heard both counsel and perused records. Learned counsel of assessee submitted that in assessment order AO has clearly mentioned his satisfaction that assessee is liable for penalty u/s 271AAA. For penalty u/s 271(1)(c) he has recorded satisfaction for initiation of penalty only with respect to FDR interest of Rs.24,900/- and bank interest of Rs.5270/-. Learned counsel further submitted that notice issued dated 21-12-2009 was show cause notice u/s 271AAA for amount of Rs.26,96,183/-. Learned counsel further submitted that another notice was issued on 21-12-2009 being show cause notice u/s 271(1)(c) which reads as under : Whereas in course of proceedings before me for A.Y. 2006- 07 it appears that you have concealed particulars of your income or furnished inaccurate particulars of such income. You are requested to appear before me at 11.00 a.m. on 15/02/2010 and show-cause why order imposing penalty on you should not be made under 271 of Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show-cause in writing on or before said date, which will be considered before any such order is made under section 271 of Act. 10. Referring to above, learned counsel of assessee submitted that from assessment order as well as notice, it is clear that AO has recorded satisfaction for issue of notice u/s 271AAA. As against above penalty order does not mention any thing about penalty u/s 271AAA. However, penalty has been levied u/s 271(1)(c) amounting to Rs.9,77,163/-. Learned counsel further referred following case laws from Hon ble Karnataka High Court and Hon ble Allahabad High Court for proposition that jurisdiction fails when there is improper notice which is with reference to 5 ITA No. 246/Nag/2016. different sections and actual penalty will be levied is with reference to different section : i) Safina Hotels (P) Ltd. vs. CIT 237 Taxman 0702 (Kar.) ii) CIT vs. Triveni Engineering and Industries Ltd. 369 ITR 0660 (All). 11. Per contra learned D.R. relied upon orders of authorities below. 12. Upon careful consideration I find that reading of assessment order clearly reveals that AO has recorded satisfaction for initiation of penalty u/s 271AAA for amount of Rs.26,96,183/- which was declared during course of search. Further more AO also recorded satisfaction for initiation of penalty u/s 271(1)(c) for interest amount of Rs.24,900/- on FDR and bank interest of Rs.5270/-. Two notices were issued on 21-12-2009. One was with reference to initiation of penalty u/s 271AAA for declared amount of Rs.26,96,183/-. Another notice was issued u/s 271(1)(c) for concealing particulars of income or furnishing inaccurate particulars of income. Reading of notice as well as assessment order together clearly reveals that AO has initiated penalty proceedings, recorded satisfaction and issued notice for penalty u/s 271AAA for amount of Rs.26,96,183/-. As against above, penalty u/s 271(1)(c) was with reference to interest of Rs.26,900/- on FDR and bank interest of Rs.5270/-. As against above in penalty order AO did not make any whisper to notice or penalty u/s 271AAA. He straight-away referred to assessee s return mentioning that assessee included income of Rs.26,96,183/- which was declared during course of search. Ultimately invoking provisions of Explanation 5A to section 271(1)(c) AO imposed penalty of Rs.9,77,163/-. 13. From above it is clear that penalty levied u/s 271(1)(c) has no reference whatsoever to satisfaction recorded u/s 271(1)(c) regarding concealment of income and furnishing of inaccurate particulars by assessee. 6 ITA No. 246/Nag/2016. Moreover AO in assessment order has in unambiguous term mentioned that penalty was to be levied u/s 271AAA. This anomaly between recording of satisfaction in different section and levy of penalty in different section has been brushed aside by learned CIT(Appeals) by holding that intention of AO appears to have been to initiate penalty u/s. 271(1)(c) for concealed amount of Rs.26,96,183/- though AO has mentioned and initiated same u/s 271AAA. 14. In my considered opinion aforesaid inference of learned CIT(Appeals) is wholly based on surmises and conjecture with no reference to iota of facts as emerging from assessment order and records. Such order is not at all sustainable. In this regard decision of Hon ble High Courts relied upon by learned counsel of assessee are also relevant. In case of Safina Hotels (P) Ltd. (supra) Hon ble Karnataka High Court has expounded that when notice was issued proposing to levy penalty u/s 271(1)(b) whereas order was passed by AO u/s 271(1)(c), it clearly indicated that there was no application of mind by AO while issuing notice u/s 274. Hence it was held that AO had no jurisdiction to pass penalty order u/s 271(1)(c) without issuing proper notice as required under law. 15. Further more Hon ble Allahabad High Court in case of CIT vs. Triveni Engineering and Industries Ltd. (supra) has expounded as under : (Head notes only). Held, in respect of heads where AO considered it appropriate to initiate penalty proceedings u/s 271(1)(c), he made specific direction to that effect In respect of claim of interest on SDF loan, there was no direction by AO Absence of reference to initiation of proceedings u/s 271(1)(c) was not inadvertent omission Even in concluding part of his order, AO issued direction for initiating penalty notice u/s 271(1)(c) As held by Supreme Court in Mak Data Private Limited vs. CIT, AO had to satisfy himself if penalty proceedings should be initiated or not during course of assessment proceedings and not required to record his 7 ITA No. 246/Nag/2016. satisfaction in particular manner or reduce it into writing There was no direction whatsoever by AO in respect of specific head of interest on SDF loan, on which penalty was deleted by ITAT Omission in case of SDF loan was in sharp contrast to those items where AO specifically directed initiation of penalty proceedings u/s 271(1)(c) ITAT was justified in deleting penalty u/s 271(1)(c) in respect of SDF loan. 16. While examining present appeal on anvil of aforesaid case laws, it is amply clear that AO had clearly indicated in assessment order as well as in show cause notice that penalty u/s 271AAA was being proposed for sum of Rs.26,96,183/-. However, in penalty order, penalty was levied u/s 271(1)(c) for aforesaid amount. From aforesaid case law it is evident that AO had no jurisdiction to levy penalty u/s 271(1)(c) in this case as notice as well as satisfaction was for penalty u/s 271AAA. Hence penalty levied in this case is liable to be quashed on jurisdiction itself. Accordingly respectfully following precedents as above, I hold that AO had no jurisdiction to levy penalty u/s 271(1)(c). Accordingly I quash penalty levied in this case. Since penalty has already been deleted on ground of jurisdiction itself, decision on merit is only of academic significance. As such same is not being engaged into. 15. In result, this appeal filed by assessee stands allowed. Order pronounced in Open Court on this 13th day of Oct., 2016. Sd/- ( SHAMIM YAHYA) ACCOUNTANT MEMBER. Nagpur, Dated: 13th Oct. , 2016. 8 ITA No. 246/Nag/2016. Copy forwarded to : 2. Shri Prafulla Gadge, 202, Sai Naman Apartment, Old Subhedar Layout, Nagpur-440023. 3. A.C.I.T., Central Circle-1(2), Nagpur. 4. C.I.T.-(Central), Nagpur. 5. CIT(Appeals), -3, Nagpur. 6. D.R., ITAT, Nagpur. 7. Guard File True Copy By Order Assistant Registrar, Income Tax Appellate Tribunal, Nagpur Bench, Nagpur. Wakode. Prafulla Gadge v. Asstt. Commissioner of Income-tax, Central Circle-1(2), Nagpur
Report Error