PER ANIL CHATURVEDI, AM :
1. This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (A) 12, Pune dt.24.03.2015 for the assessment year 2010-11.
2. The relevant facts as culled out from the material on record are as under :- Assessee is a Partnership firm stated to be engaged in the business of gold ornaments and jewellery. Assessee electronically filed its original return of income for A.Y. 2010-11 on 29.09.2010 declaring / Date of Hearing : 10.04.2018 / Date of Pronouncement: 31.05.2018 total income as nil. The case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act dt.08.06.2012 was issued and served on the assessee. Later, assessment was framed u/s 143(3) of the Act vide order dt.29.03.2013 and the total taxable income was determined at Rs.2,97,46,750/- inter-alia by making addition of Rs.3,06,52,888/- on account of cessation of liability of the credit balance u/s 41(1)(a) of the Act. On the aforesaid addition, AO vide order dt.27.09.2013 levied penalty of Rs.91,91,746/- u/s 271(1)(c) of the Act. Aggrieved by the order of AO, assessee carried the matter before Ld. CIT(A), who vide order dt.24.03.2015 (in appeal No.PN/CIT(A)-12/ITO Wd- 3(4)/328/2013-14) dismissed the appeal of the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following grounds :
1. On the facts and in the circumstances of the case and in law the CIT (Appeals) has erred in confirming penalty of Rs. 91,91,7461- levied by the Assessing Officer u/s. 271 (1)(c) of the I.T.Act.
2. On the facts and in the circumstances of the case and in law the CIT (Appeals) has erred in not appreciating that the penalty order passed by the Assessing Officer u/s. 271(1)(c) of the Act, is bad in law and unsustainable for the following reasons; The Assessing Officer has initiated the penalty proceedings in the assessment order for the charge of furnishing of inaccurate particulars of income, whereas while issuing the notice u/s.' 274 r.w.s. 271(1)(c) of the Act, the Assessing Officer is not even sure as to for which charge the penalty proceedings have been initiated i.e. whether it is for concealment of the particulars of income or it is for furnishing of inaccurate particulars of income, and finally the Assessing Officer has levied the penalty without at all specifying the charge for which the penalty is levied. The Assessing Officer has not specified any of the two charges. He has simply levied the penalty for "concealment of income" which is not even a charge given in section 271 (1)(c) of the Act.
3. On the facts and in the circumstances of the case and in law the CIT(Appeals) has erred in not appreciating that the penalty has been levied on the bases of the addition of Rs. 3,06,52,888/- made by applying the provisions of section 41 (1) of the I T.Act, for cessation of liability. The addition itself is not sustainable in law because it has been made without establishing that liability in question has actually ceased to exist. Moreover the Assessing Officer neither while making the addition in the assessment order nor while levying the penalty has pointed out any event that has taken place in the financial year 2009-10 to trigger the cessation of liability in that financial year relevant to A.Y. 2010- 11. Therefore penalty levied U/s 271 (1) (c) of the Act, is unsustainable in law.
4. On the facts and in the circumstances of the case and. in law the CIT (Appeals) has erred in not appreciating that the Assessing Officer has not pointed out as to which inaccurate particulars of income have been furnished by the assessee or as to which particulars of income have been concealed by the assessee. Therefore penalty levied U/s 271 (1)(c) of the Act, is unsustainable in law.
3. Before us, at the outset, Ld.A.R. submitted that though assessee has raised various grounds but the sole controversy is with respect to levy of penalty u/s 271(1)(c) of the Act.
4. Before us, Ld.A.R submitted that while passing the assessment order AO with respect to addition of Rs.3,06,52,888/- on account of cession of liability u/s 41(1) of the Act has recorded that assessee had furnished inaccurate particulars of income but while passing the penalty order u/s 271(1)(c) of the Act on 27.09.2013 AO had levied penalty for concealment of income. He therefore, relying on the decision of Honble Bombay High Court in the case of CIT Vs. Samson Perinchery (ITA No.1154 of 2014 order dt.05.01.2017), submitted that in the absence of proper show cause notice to assessee, penalty u/s 271(1)(c) cannot be levied and therefore urged that penalty levied by AO be deleted. Ld.D.R. on the other hand, supported the order of lower authorities.
5. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to levy of penalty u/s 271(1)(c) of the Act. In the present case, penalty of Rs.91,91,746/- u/s 271(1)(c) of the Act has been levied on the addition of Rs.3,06,52,888/- u/s 41(1) of the Act. The perusal of assessment order passed u/s 143(3) of the Act reveals that in the assessment order AO had recorded satisfaction for furnishing of inaccurate particulars of income. Thereafter, in the penalty order dt.27.09.2013 passed u/s 271(1)(c) of the Act, AO had levied penalty for concealment of income. Even in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act dt.28.03.2013 AO has not stated that whether the penalty is for furnishing of inaccurate particulars of income or for concealing the particulars of income. It is a settled law that while levying penalty for furnishing of inaccurate particulars of income and concealment of income, 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 its income or furnished inaccurate particulars of income. Thereafter, notice u/s 274 read with Section 271(1)(c) of the Act is to be issued to the assessee. The Assessing Officer thereafter has to levy penalty under Section 271(1)(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 its income or furnished inaccurate particulars of income. The Honble Bombay High Court in CIT Vs. Shri Samson Perinchery in ITA No.1154 of 2014 with other ITA Nos.953 of 2014, 1097 of 2014 and 1226 of 2014, vide judgment dated 05.01.2017 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.
6. Considering the facts of the present case in the light of the decision of Honble 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 and therefore penalty order cannot be upheld. We accordingly set aside the penalty order passed by AO. Thus, the ground of assessee is allowed.
7. In the result, the appeal of the assessee is allowed. Order pronounced on 31st day of May, 2018. Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) ! / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER Pune; Dated : 31st May, 2018. Yamini # $&' ('/Copy of the Order forwarded to : / The Appellant
2. / The Respondent CIT(A)-12, Pune. CIT-II, Pune. " %%&, &, / DR, ITAT, B Pune; , / Guard file. / BY ORDER // True Copy // ./ % & / Sr. Private Secretary & , / ITAT, Pune.