Income Tax Appellate Tribunal - Pune
S.L.K. Properties,, vs Assessee on 18 March, 2016
आयकर अपील य अ धकरण, पुणे यायपीठ "बी" पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी आर. के. पांडा, लेखा सद य
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BEFORE SHRI R.K. PANDA, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No.140/PN/2014
#नधा&रण वष& / Assessment Year : 2006-07
.......... अपीलाथ /
S.L. K. Properties, Appellant
289/2, Mahatma Phule Peth,
Pune - 42.
PAN No.ABEFS6900J
बनाम v/s
ITO, Ward-2(1), Pune .......... यथ /
Respondent
अपीलाथ क ओर से / Assessee by : Shri Sharad Shah
यथ क ओर से / Revenue by : Shri Hitendra Ninawe
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing :10.03.2016 Date of Pronouncement: 18 .03.2016
आदे श / ORDER
PER R.K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 17-09-2013 of the CIT(A)-II, Pune relating to Assessment Year 2006-07.
2. Grounds raised by the assessee are as under :
"1. The Ld. AO erred in levying (and Ld.CIT(A)-III) erred in confirming) penalty of Rs.23,77,742/-.
2. The Ld. AO erred in disregarding the explanation submitted by the assessee for non levy of penalty.2
ITA No.140PN/2014
3. The appellant craves its right to add to or alter the grounds of appeal at any time before or during the course of hearing of the case."
3. The assessee has also taken the following additional ground :
"There is no clear satisfaction by the AO whether he is satisfied for concealment or income or whether for submission of inaccurate particulars and hence the levy of penalty is invalid."
4. The Ld. Counsel for the assessee referring to the additional ground submitted that the said ground is purely a legal ground and no fresh facts are required to be investigated. Relying on the decisions of Hon'ble Supreme Court in the case of NTPC Ltd. reported in 229 ITR 383 and in the case of Jute Corporation of India Ltd. reported in 187 ITR 688 and the decision of Hon'ble Bombay High Court in the case of Ahmedabad Electricity Company reported in 199 ITR 351 he submitted that the additional ground raised by the assessee should be admitted.
5. After hearing both the sides and considering the additional ground raised by the assessee being purely legal in nature, the additional ground raised by the assessee is admitted for adjudication.
6. Facts of the case, in brief, are that the assessee is engaged in the activities of Builders and Promoters. A search and seizure action u/s.132 of the Act was conducted in the cases of Ladkat group. During the said search page No.8 of Bundle No.16 was seized at M/s. New Auto Corner, Plot No.36, Somwarpeth, Pune which is a page in pencil writing by Shri Gautam Ladkat. It was observed that on the top of this page there is a noting "SLK 3 ITA No.140PN/2014 Investment uptill now" and below that columns are made as "CHS" and "CQ" column CQ is blank but under column "CHS" following notings are made :
Plot 61,00,000
Khedkar Bai 25,000
Assignment tax 89,000
Demarcation 50,000
Raju 2,00,000
Girme 2,25,000
Demarcation 75,000
Plan Pass 3,00,000
---------------
70,64,000
---------------
23,55,000 per"
7. The said document was stated to belonging to the asssessee firm which is engaged in the business of promoters and builders. Shri Gautam Ladkat, a partner of the assessee firm, explained its writings on said documents. In view of the above, notice u/s.153C was issued to the assessee. During the course of assessment proceedings the AO confronted the assessee about such notings. According to the AO the said document reflected investment in a project being undertaken by SLK Properties (assessee firm) which was not accounted for in the books of account maintained by the firm.
8. After considering the explanation putforth by the assessee the AO concluded that the payments reflected in the said document do not find any place in the regular books of account maintained by the assessee. He accordingly treated that the amount of Rs.70,64,000/- represented unexplained investment by the assessee which he added to the total income of the assessee.
4
ITA No.140PN/2014
9. In appeal the CIT(A) upheld the action of the AO. On further appeal the Tribunal also upheld the order of the CIT(A). In the meantime, the AO had initiated penalty proceedings u/s.271(1)(c) of the I.T Act. Rejecting the various explanations given by the assessee the AO levied penalty of Rs.23,77,742/- being 100% of tax sought to be evaded. In appeal the Ld.CIT(A) upheld the penalty so levied by the AO.
10. Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
11. The Ld. Counsel for the assessee at the outset submitted that there is no clear satisfaction by the AO as to whether he is levying penalty for concealment of income or for furnishing of inaccurate particulars of income. Referring to the copy of the assessment order he drew the attention of the Bench to para 10 of the order which reads as under :
"10. The penalty proceedings u/s.271(1)(c) of the I.T. Act, 1961 for concealing the particulars of income and furnishing inaccurate particulars of such income are separately initiated."
12. Referring to bottom of the assessment order he submitted that the AO has again mentioned to issue notice u/s.274 r.w.s. 271(1)(c) of the I.T. Act for concealment of income as discussed in the body of order. Referring to the notice issued u/s.274 r.w.s. 271(1)(c) vide letter dated 22-03-2012 he submitted that here also there is no mention as to whether the penalty has been levied for concealment of income or for furnishing of inaccurate particulars of income.
5
ITA No.140PN/2014
13. Referring to the decision of the Pune Bench of the Tribunal in the case of Sanjog Tarachand Lodha Vs. ITO vide ITA Nos. 688 and 689/PN/2014 order dated 31-08-2015 for A.Yrs. 2007-08 and 2008-09 he submitted that the Tribunal, following the decision of Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory reported in 359 ITR 565, has held that where it is not clear from the notice u/s.274 the reasons for levying penalty the notice itself is bad in law and the penalty order passed on the basis of such notice is not sustainable. Since in the instant case admittedly it is not clear from the notice issued u/s.274 regarding the reasons for levy of penalty, therefore, the notice itself has to be held as bad in law and invalid and consequently the penalty order passed on the basis of such invalid notice is not sustainable.
14. So far as the merit of the case is concerned the Ld. Counsel for the assessee drew the attention of the Bench to para 9 of the assessment order which reads as under :
"Merely because the investment uptil the search period approximately matches with the figure appearing on the said paper cannot mean that it is explained. Assessee has to show every entry in the books of accounts, if at all assessee's contention be considered. In absence of that, the only conclusion which can be drawn from the contents of the paper and the statement of the assessee is that the investment figures mentioned on the paper represent the cash investment which does not find place in the books of accounts of the assessee. Therefore, an amount of Rs.70,64,000/- represents the unexplained investment by M/s. SLK Properties. The firm M/s. SLK Properties came into existence during the F.Y. 2005-06 and most of the narrations in the above paper appear to be those related to property and initial investment related transactions and further, as no date is mentioned on this page, the same are treated as the unexplained investment for the Asstt. Year 2006-07."
15. He submitted that the AO has not given a definite conclusion. He has not issued any notice to the land owners and 6 ITA No.140PN/2014 passed the assessment order only on the basis of the paper seized. He submitted that penalty proceedings and quantum proceedings are separate and distinct and the assessee can always bring new facts or make new arguments during penalty proceedings. Therefore, even on merit also, no penalty is leviable since the addition is based on a paper seized from third party and the AO has not made proper verification by issue of notice to any of the landlords. He accordingly submitted that penalty cannot be levied u/s.271(1)(c) of the I.T. Act.
16. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that the quantum addition has been upheld by the Tribunal. The assessee has not disclosed the amount of investment in cash in its books of account for which addition was made by the AO which has been upheld by the CIT(A) and further by the Tribunal. Therefore under these circumstances levy of penalty u/s.271(1)(c) of the I.T. Act is justified.
17. As regards the reliance on the decision of the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (Supra) is concerned for treating the notice u/s.274 as bad in law for not clearly mentioning the reasons for levy of penalty he submitted that the decision of Hon'ble Supreme Court in the case of Mak Data Pvt. Ltd. Vs. CIT reported in 358 ITR 593 is applicable. Referring to para 10 of the order he submitted that the Hon'ble Supreme Court in the said decision has held that the AO has to satisfy whether the penalty proceedings be initiated or not during the course of assessment proceedings and the AO is 7 ITA No.140PN/2014 not required to record his satisfaction in a particular manner or reduce it into writing. The Hon'ble Supreme Court while deciding the issue has followed the decision of Hon'ble Supreme Court in the case of Union of India Vs. Dharmendra Textile Processors reported in 13 SCC 369 and CIT Vs. Atul Mohan Bindal reported in 9 SCC 589. He accordingly submitted that the additional ground raised by the assessee should be dismissed. 17.1 The Ld. Counsel for the assessee in his rejoinder submitted that the decision in the case of Mak Data (P) Ltd. (Supra) is distinguishable and not applicable to the facts of the present case. He submitted that since the Coordinate Bench of the Tribunal has already considered identical issue and deleted the penalty holding that the notice issued u/s.271(1)(c) r.w.s.274 is invalid in a situation where it is not clear from such notice reasons for levying of penalty and the notice has been held to be invalid, therefore this being a covered matter the additional ground raised by the assessee should be allowed and the penalty be deleted.
18. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO made addition of Rs.70,64,000/- to the total income of the assessee on the basis of a paper titled page 8 Bundle No.16 seized from the premises of M/s. New Auto Corner, Plot No.36, Sadashiv Peth, Pune, a concern belonging to the assessee group. The 8 ITA No.140PN/2014 documents seized show investment of an amount of Rs.70,64,000/- by the assessee which was not recorded in its books of account. The AO accordingly made addition of Rs.70,64,000/- on account of undisclosed investment which has been upheld by the CIT(A). Even the further appeal filed by the assessee was also dismissed by the Tribunal. Thus, the issue of quantum addition has been decided against the assessee. We find the AO in view of the addition of Rs.70,64,000/- on account of undisclosed investment initiated penalty proceedings u/s.271(1)(c) of the I.T. Act and levied penalty of Rs.23,77,742/- being 100% of tax sought to be evaded which has been upheld by the CIT(A).
19. The first plank of argument of the Ld. Counsel for the assessee is regarding the validity of the penalty order in view of an invalid notice for levy of penalty. According to him in para 10 of the assessment order the AO has initiated penalty proceedings u/s.271(1)(c) of the I.T. Act, 1961 for concealing the particulars of income and furnishing of inaccurate particulars of such income. Even at the end of the assessment order the AO mentions issue notice u/s. 274 r.w.s. 271(1)(c) also of the Act, 1961 for concealment of income as discussed in the body of the assessment order. Further the notice dated 22-03-2012 for penalty proceedings u/s. 271(1)(c) does not speak clearly as to whether such penalty is being levied for concealment of income or furnishing of inaccurate particulars of income. Therefore, according to him, in view of the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning 9 ITA No.140PN/2014 Factory (Supra) which has been followed by the Coordinate Bench of the Tribunal in the case of Sanjog Tarachand Lodha (Supra) such penalty notice is bad in law where it is not clear from the notice u/s.274 about the reasons for levying penalty. According to him, the penalty order passed on the basis of such invalid notice is not sustainable.
20. We find merit in the above submission of the Ld. Counsel for the assessee. Admittedly, the AO in the body of the assessment order at para 10 has initiated penalty proceedings for concealment of particulars of income and furnishing inaccurate particulars of income by the assessee. At the end of the assessment order the AO mentions issue notice u/s.274 r.w.s.271(1)(c) for concealment of income as discussed in the body of the order. The relevant para 10 and last part of the assessment order read as under :
"10. The penalty proceedings u/s.271(1)(c) of the I.T. Act, 1961 for concealing the particulars of income and furnishing inaccurate particulars of such income are separately initiated."
........ ...... ......
........ ...... ......
"Assessed u/s.153A(b) r.w.s.153C of the I.T. Act, 1961. Charge interest due as per section 234A, 234B & 234C of the I.T. Act, 1961. Give credit for prepaid taxes after verification. Issue notice u/s.274 r.w.s.271(1)(c) of the I.T. Act, 1961 for concealment of income as discussed in the body of order."
21. We further find from the notice issued u/s.274 r.w.s.271(1)(c) dated 31-12-2008 is also silent on the reasons for initiation of penalty proceedings u/s.271(1)(c) of the I.T.Act, 1961.
10
ITA No.140PN/2014
22. We find identical issue had come up before the Pune Bench of the Tribunal in the case of Sanjog Tarachand Lodha Vs. ITO vide ITA Nos. 688 and 689/PN/2014 order dated 31-08- 2014 for A.Yrs. 2007-08 and 2008-09. We find the Tribunal under identical circumstances had held the notice issued u/s.271(1)(c) r.w.s. 274 as invalid and cancelled the penalty levied on the basis of such invalid notice by observing as under:
"5. We have heard the submissions made by the ld. DR and have thoroughly perused the written submission along with paper book filed by the assessee. A search and seizure action u/s. 132 of the Act was conducted on 21-05-2009 in the case of Lodha Group. Pursuant to notice issued u/s. 153A, the assessee filed his return of income for the impugned assessment years. In the return of income for the impugned assessment years, the assessee declared additional income admitted during the course of search. The assessment was completed u/s. 153A r.w.s. 143(3) by accepting the income returned by the assessee. Thus, no further addition was made during the course of assessment proceedings. Penalty u/s. 271(1)(c) was initiated against the assessee on the additional income admitted during search and returned u/s. 153A proceedings. The assessee has placed on record notices issued u/s. 271(1)(c) r.w.s. 274 of the Act for levy of penalty in the assessment years 2007-08 and 2008-09. The said notices are at pages 15 and 16 of the paper book. A perusal of notices show that they are stereo type notices, with blank spaces. Specific reasons for levy of penalty u/s. 271(1)(c), whether it is for concealment of particulars or for furnishing inaccurate particulars or for both, have not been specified. The assessee in his written submission has pointed out that if the irrelevant columns of the printed form of notice u/s. 274 have not been stuck off by the Assessing Officer, the notice for levy of penalty u/s. 271(1)(c) shall be deemed to be invalid. In support of these submissions, reliance has been placed on the decision of Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory reported as 359 ITR 565 (Karan).
6. A perusal of the order passed u/s. 271(1)(c) dated 28-06- 2012 levying penalty shows, that in para 2 the Assessing Officer has specifically mentioned that penal proceedings u/s. 271(1)(c) are initiated for concealing the income. The relevant extract of para 2 of the order levying penalty reads as under:
"2. ..........Since assessee had originally concealed income to the extent of Rs.7,92,190/-, penalty proceedings u/s. 271(1)(c) of the Act was initiated on finalization of assessment proceedings."11
ITA No.140PN/2014 In both the impugned assessment years, the order levying penalty are similarly worded.
7. In the concluding paragraph of the order, the Assessing Officer has observed that the penalty is levied for furnishing of inaccurate particulars of income and concealing income. The relevant extract of para 7 of the order reads as under:
"7. I am satisfied that the assessee has without any reasonable cause, furnished an inaccurate particulars of income and thereby concealed his income to the extent of ............................"
Furnishing of inaccurate particulars of income and concealing of income are two different expressions having different connotations. For initiating penalty proceedings, the Assessing Officer has to be very specific for the reasons of levying penalty, Whether it is for furnishing of inaccurate particulars of income or concealing of income or for both. In the present case, a perusal of notice issued u/s. 271(1)(c) r.w.s. 274 shows that the Assessing Officer has not specified the reasons for levying of penalty i.e. whether it is for furnishing of inaccurate particulars or concealment of income or both. Further, a bare perusal of the order levying penalty would show that the Assessing Officer is not clear whether the penalty is levied for concealment of income or furnishing of inaccurate particulars of income or both.
8. The Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (supra) has held that where it is not clear from the notice u/s. 274 the reasons for levying of penalty the notice itself is bad in law and the penalty order passed on the basis of such notice is not sustainable. The relevant extract of the order of Hon'ble High Court reads as under:
"NOTICE UNDER SECTION 274
59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity 12 ITA No.140PN/2014 to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee.
60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.
61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under 13 ITA No.140PN/2014 clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujrat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxmn 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 not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind."
9. Thus, in the facts of the case and documents on record, we are of the considered view that the notice issued u/s. 271(1)(c) r.w.s. 274 is invalid and thus, the subsequent penalty proceedings arising there from are vitiated. The impugned orders are set aside and the appeals of the assessee are allowed."
23. So far as reliance on the decision of Mak Data Pvt. Ltd. by the Ld. Departmental Representative is concerned the same in our opinion is not applicable to the facts of the present case. The decision in the case of Mak Data Pvt. Ltd. has to be understood in the context of the facts of the said case. Therefore, before relying on a particular sentence or paragraph of the said decision one has to read the preceding paragraph of the said decision which read as under:
"9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was 14 ITA No.140PN/2014 conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961.
Therefore, the reliance only on the sentence appearing in para 10 of the judgement without reading it in the context under which said observation was made in para 9 is misplaced by the Ld. Departmental Representative.
24. A plain reading of the decision of Hon'ble Supreme Court from para 9 and 10 combinedly suggest that the satisfaction need not be recorded in a particular manner but from a reading of the assessment order as a whole such satisfaction should be clearly discernible. Therefore, the reliance by the Ld. Departmental Representative on the decision of Mak Data Pvt. Ltd. in our opinion is misplaced and not applicable to the facts of the present case. This view of ours finds support from the decision of Kolkata Bench of the Tribunal in the case of Suvaprasanna Bhataacharya Vs. ACIT in ITA No.1303/Kol/2010 order dated 06-11-2015 for A.Y. 2006-07. In this view of the matter, we are of the considered opinion that since it is not clear from the notice u/s.274 the reasons for levying of penalty as to whether it is for concealment of income or for furnishing of inaccurate particulars of income, therefore, the notice itself is bad in law and invalid. Therefore, the penalty order passed 15 ITA No.140PN/2014 subsequently on the basis of such invalid notice also has to be held as bad in law. We accordingly cancel the penalty levied by the AO. Since the assessee succeeds on this technical ground the arguments on merit is not being adjudicated being academic in nature.
25. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 18-03-2016.
Sd/- Sd/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे Pune; दनांक Dated : 18th March, 2016. सतीश
आदे श क) *#त,ल!प अ-े!षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A)-II, Pune
4. The CIT-II, Pune
5.
$वभागीय 'त'न(ध, आयकर अपील य अ(धकरण, "बी" पण ु े/ DR, ITAT, "B" Pune;
6. गाड- फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, // True Copy // //स या$पत 'त //True C व/र0ठ 'नजी स(चव / Sr. Private Secretary आयकर अपील य अ(धकरण, पुणे / ITAT, Pune