The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, on finding that the basic condition as stipulated under Section 271 (1) (c) is not fulfilled, deleted the penalty imposed by the Revenue.
The aforesaid observation was made by the Delhi ITAT, when an appeal was filed before it by the assessee, as directed against the order dated 15.11.2019, passed by the Commissioner of Income Tax (Appeals), Delhi, under Section 250 of the Income Tax Act, 1961 for Assessment Year 2011-12.
The grounds of the assessee’s appeal being that in the facts and circumstances of the case, the A.O. has erred in imposing penalty without service of notice to assessee, and also that the A.O. has erred in imposing penalty, since in the quantum order charge on penalty as was initiated has not been specified i.e., whether for concealment of income or for furnishing inaccurate particulars of income , the brief facts of the case were that the Assessee was an individual , who was a proprietor of Jai Balaji Group.
It so happened that it was brought to the notice of the AO, as per the information received from DDIT(Inv.) Unit, Mumbai, that the firms/concerns operated by Anil Kumar Jain and Mr. Praveen Kumar Jain and their associates, were providing accommodation entries to various beneficiaries.
On analysis of the bank statement of Kritvi Enterprises Pvt.Ltd,which was operated by Anil Kumar Jain and Mr. Praveen Kumar Jain, it was noticed that assessee was in receipt of bogus entries of Rs.15,00,000/- on different dates during the Financial Year 2010-11. The AO also noted that a perusal of data of AST Systems revealed that though the assessee had filed return of income for A.Y. 2011-12, yet the bogus purchases/accommodation entries of Rs.15,00,000/- was not disclosed while preparing taxable income.
He was therefore of the view that Rs.15,00,000/- had escaped the assessment, and accordingly, he issued a notice under Section 148 of the Income Tax Act, dated 31.03.2018, as was served on the assessee.
The AO noted that notice under Section 142(1) and 143(2) were issued, but that there was no representation from the side of the assessee. And thereafter, on finding that there was no representation from the assessee and that the assessment was getting time barred, he therefore passed the order under Section 147/144 of the Income Tax Act, vide order, dated 28.11.2018, wherein he made an addition of Rs.15,00,000/-.
On the aforesaid addition of Rs.15,00,000/-, the AO vide penalty order passed under Section 271(1)(c), levied the penalty of Rs.3,13,120/-. And this left the assessee agitated.
Being aggrieved by the order of penalty order passed by AO, the assessee therefore carried the matter before CIT(A), who vide order dated 15.11.2019, dismissed the appeal of the assessee. And it is in this situation, that the assessee has preferred the instant appeal before the Delhi ITAT.
Perusing the materials available on record, as well as hearing the contentions as presented by Ms. Sangeeta Yadav, the Sr. D.R., on behalf of the Revenue, while no one appeared on behalf of the assessee, the Delhi ITAT observed:
“It is a settled law that while levying penalty the AO has to record satisfaction and thereafter come to a finding in respect of one of the limbs, which 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 assessee had concealed the income or furnished inaccurate particulars of income. Thereafter, notice under Section 274 read with Section 271(l)(c) of the Act is to be issued to the assessee.”
“The Assessing Officer thereafter has to levy penalty under Section 271(l)(c) of the Act for non-satisfaction of either of the limbs. While completing the assessment, the Assessing Officer has to come to a finding as to whether the assessee has concealed the income or furnished inaccurate particulars of income. The Hon’ble Bombay High Court in CIT vs. Samson Perinchery (2017) 392 ITR 4 (Bom) has held that where initiation of penalty is one limb and the levy of penalty is on other limb, then in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty”, the coram of Yogesh Kumar US, the Judicial Member and Anil Chaturvedi, the Accountant Member added.
Thus, the ITAT finally held: “Considering the facts of the present case in the light of the aforesaid decision of Hon’ble Bombay High Court in the case of Samson Perinchery (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 of AO. Considering the totality of the aforesaid facts, we are of the view that the conditions stipulated under Section 271(1)(c) for the levy of penalty are not attracted in the present case. We therefore, direct its deletion. The ground of assessee is allowed.”
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