Sanjay Malik, Adv. for the Assessee. C.P. Singh, Sr. DR. for the Department.

Assessee has filed the present appeal against the Order dated 06.6.2016 passed by the Ld. Commissioner of Income Tax (Appeals), Ghaziabad pertaining to assessment year 2003-04.

2. The assessee has raised the following revised grounds of appeal:-

1. The order passed by the AO was without satisfaction recorded need to be annulled.

2. In the assessment order the AO did not specified whether the penalty is for concealment or of inaccurate particulars of income.

3. The assessee company received money through cheques which were accounted in banks account of the company. Nature and source of deposits with the company stood proved on the facts of the case. The source of deposits was proved and substantiated, thus there is no concealment of income by the assessee.

4. That on the facts and in law penalty proceedings are distinct and separate from assessment proceedings. There is no infirmity hence there is no furnishing of inaccurate particulars of income by the assessee.

5. In the order there is no direction u/s. 271(1)© for levy of penalty. Thus levy of penalty is illegal and void.

3. At the time of hearing, Ld. Counsel for the assessee has stated that the order passed by the AO was without satisfaction recorded and needs to be annulled. He further stated that in the assessment order the AO did not specified whether the penalty is for concealment or for inaccurate particulars of income. It was further submitted that the assessee company received money through cheques which were accounted in banks account of the company and the nature and source of deposits with the company stood proved on the facts of the case. The source of deposits was proved and substantiated, thus there is no concealment of income by the assessee. It was further submitted that the penalty proceedings are distinct and separate from assessment proceedings. There is no infirmity hence there is no furnishing of inaccurate particulars of income by the assessee. In the last, it was submitted that in the order there is no direction u/s. 271(1)© for levy of penalty. Thus levy of penalty is illegal and void. In view of the above, he stated that entire penalty proceedings stand vitiated, because it is not in accordance with law and in order to support his contention, he placed the reliance on the following decisions:-

- Hon’ble Karnataka High Court decision in the case of CIT & Ors. Vs. M/s Manjunatha Cotton and Ginnig Factory & Ors. (2013) 359 ITR 565

- Apex Court decision in the case of CIT & Anr. Vs. M/s SSA’s Emerald Meadows in CC No. 11485/2016 dated 05.8.2016.

In view of above, he requested that the penalty in dispute may be cancelled and appeal of the assessee may be allowed accordingly.

4. On the contrary, Ld. DR relied upon the orders of the authorities below and submitted that following decisions may kindly be considered with regard to levy of penalty u/s. 271(1)© in light of decision of Karanataka High Court in CIT vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (para 4) and Hon’ble Supreme Court of India in the case of CIT vs. SSA’s Emerald Meadows (2016) 73 Taxmann.com 248 (SC)/[2016] 242 Taxman 180 (SC).

i) ITO vs. Rajan Kalimuthu (ITA no. 2900/CHNY/2018) (TS-289-ITAT-2019(CHNY) : ITAT: AO’s failure to strike – off column in SCN, no ground for deleting penalty.

ii) Sundaram Finance Ltd. vs. CIT (2018) 99 taxmann.com 152 (SC).

SLP dismissed against High Court ruling that where assessee claimed depreciation on non- existent assets, penalty under section 271(1)© was to be levied for filing inaccurate particulars of income.

iii) Sundaram Finance Ltd. vs. CIT (2018) 93 taxmann.com 250 (Madras) (2018) 403 ITR 407 (Madras)

iv) CIT vs. Smt. Kaushalya (1994) 75 Taxman 549 (Bombay) [1995] 216 ITR 660 (Bombay).

v) Trimurti Engineering Works vs. ITO (2012) 25 taxmann.com 363 (Delhi/ [2012] 138 ITD 189 (Delhi) [2012] 150 TTJ 195 (Delhi)

Where ITAT, Delhi held that it was apparent from combined reading of notice and assessment order that impugned notice had been issued in respect of concealment of particulars of income.

vi) Hybrid Rice International Pvt. Ltd. vs. CIT (ITA No. 285/Del/2007).

Where ITAT, Delhi held that it was apparent from combined reading of notice and assessment order that impugned notice had been issued in respect of concealment of particulars of income.

vii) Earthmoving Equipment Service Corporation vs. DCIT (2017) 84 Taxmann.com 51 (Mumbai-Trib)/ [2017] 166 ITD 113 (Mumbai-Trib) [2017] 187 TTJ 233 (Mumbai-Trib.)

viii) DCIT vs. Shah Rukh Khan (2018) 93 taxmann.com 320 (Mumbai-Trib.)

ix) Dhanraj Mills Pvt. Ltd. vs. ACIT (ITA No. 3830 & 3833/Mum/2009

5. I have carefully considered the rival submissions and perused the orders of the revenue authorities especially the assessment order, penalty order and the appellate order. After perusing the assessment order, I find that AO did not record his satisfaction for initiation of penalty proceedings, because while passing the assessment order dated 28.03.2006 passed u/s. 143(3) of the I.T. Act, the AO has stated that

“.....Penalty proceedings u/s. 274 read with section 271(1)© has been issued separately for concealment of income and furnishing of inaccurate particulars of such income...”, which is not sufficient and therefore, the penalty proceedings cannot be said to be validly initiated under such circumstances. However, nowhere in the assessment order states the specific charge of alleged concealment and / or furnishing of inaccurate particulars of income. Similarly, in the penalty order passed u/s. 271(1)© of the I.T. Act, 1961 dated 12.3.2015, the Dy. Commissioner of Income Tax, Circle-1, Ghaziabad has mentioned that “...In my view it is a case of deliberate concealment of income by furnishing inaccurate particulars. Therefore, penalty u/s. 271(1)© is clearly attracted in this case...”, which is not sufficient to levy the penalty in dispute. Therefore, the entire penalty proceedings stand vitiated, because it is not in accordance with law, in view of the law settled in the following case laws.

i) “CIT & Anr. Vs. M/s SSA’s Emerald Meadows – 2015 (11) TMI 1620 – Karnataka High Court has held that Tribunal has correctly allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income Tax vs. Manjunatha Cotton and Ginning Factory (2013) (7) TMI 620- Karanataka High Court. Thus since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion no substantial question of law arises – decided in favour of assessee.”

ii) CIT & Anr. Vs. M/s SSA’s Emerald Meadows – Hon’ble Supreme Court of India – reported in 2016 (8) TMI 1145 – Supreme Court. The Apex Court held that High Court order confirmed (2015) (11) TMI 1620 (Supra) – Karnataka High Court. Notice issued by AO under section 274 read with section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income – Decided in favour of assessee.”

5.1 In the background of the aforesaid discussions and respectfully following the precedents, I delete the penalty in dispute and decide the issue in favor of the assessee and against the Revenue. Since I have deleted the penalty and did not discuss the penalty issue on merit. It is noted that no direct case laws on the issue in dispute of the Higher Courts has been relied upon by the Ld. Sr. DR. It is also noted that some case laws referred by the Ld. Sr. DR are on distinguished facts and not helpful for the Revenue.

6. In the result, the appeal filed by the Assessee stands allowed.