TMI Blog2020 (8) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... vitiate. AO has to arrived at clear satisfaction regarding the limb under which, he proposed to levy penalty before issue of notice u/s 274 r.w.s 271(1)(c) of the Act. This legal proposition is supported by the decision of Hon ble Karnataka High court in the case of CIT vs. Manjunatha cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] and was upheld by the Hon'ble Supreme court, in the case of CIT vs M/s SSA's Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER]. CIT vs Samson Perinchery [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] has held that if notice issued for one limb and penalty levied for another limb then, the whole proceedings become void ab-inito and liable to be quashed. In this case, on perusal of facts, we find that the Ld. AO has failed to arrive at clear satisfaction - Decided in favour of assessee. - ITA No.2250/Mum/2018 - - - Dated:- 29-7-2020 - Shri G. Manjunatha, Accountant Member And Shri Ram Lal Negi, Judicial Member For the Assessee : Smt. Dinkel Haria, AR For the Revenue : Shri. Michael Jerald, DR ORDER PER G.MANJUNATHA (A.M): This appeal filed by the assessee is directed against, the order of the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty of ₹ 2,96,254/-. The relevant findings of the Ld. AO are as under:- 3.1. Separate penalty proceedings were also initiated by issuing notice u/s.274 r.w.s,271 of the Income tax Act ,1961 on 27.03.2014. The assessee furnished reply vide dt.28.04.2014. 3.2 It was stated by the assessee that an order u/s.27l(1)(c) in imposing a penalty of ₹ 6,45,750/- was made against the assessee and the question of passing any further order of penalty under the provision of section 271(1) in respect of the same alleged concealed income does not arise and as such the notice issued u/s.274 r.w.s,271(1)(c)) is bad in law. It was further argued by the assessee that the assessee had withdrawn his right to cross examine the witness only if the assessment was completed on the basis of conditional offer of agreed addition of ₹ 806132/- and not otherwise. The assesses was not allowed and opportunity to cross examine. 3.3. The submissions of the assessee have been carefully considered. As per the direction of the Hon'ble ITAT, the set aside assessment in this case was completed and the amount of addition u/s.68 of the I.T.Act 1961 was made at ₹ 8,06,132/-. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(c) of the I.T.Act, 1961. The relevant findings of the Ld.CIT(A) are as under:- 5. I have perused the farts of the case rind appellant's submissions carefully. 1 find that in original assessment order u/s 143(3), the addition was made in respect of peak cash credit from 3 parties, i.e. (i) M/s Deepak Corporation, (ii) M/s Ruchita Enterprises, (Hi) M/s Antima Corporation. The assessee had claimed that these are concerns of one Shn Kailash Kabra in his statement, on oath, Shri Kailash Kabra had admitted to have given funds to assessee company through his proprietary concern M/s Deepak Corporation. As for the other two concerns, viz. M/s Ruchita Enterprises M/s Antima Corporation, Shri Kailash Kabra stated that the transactions were done by the assessee company but the cheques were signed by him on behalf of the assessee company. Therefore, Shri Kailash Kabra disowned the said two concerns as owned by him. During appellate proceedings before CIT(A), the director of assessee company requested for cross examination of Shri Kailash Kabra at the remand stage, but Shri Kailash Kabra did not present himself on appointed days. Based on the facts, the CIT(A) confirmed the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be blamed for not allowing cross examination to the assesse. In any case, the fact is that the assessee itself has agreed to the addition to the tune of ₹ 8,06,132/- which is quiet a meaningful admission and therefore, it is undisputed now that the said amount constituted unexplained cash credit in hands of the appellant. In the matter of penalty imposable in case of surrender of income to buy mental peace, the appellant has relied upon some case laws, e.g. CIT vs. Marsh Talwar 335 1TR 200 (Del.}, CIT vs. SLN Traders 243 CTR 407 (Kar), Ramruith Jagannath vs. State of Maharashtra 57 STC 46 (Bom) etc. I find the same to be distinguishable, since in present case, the income surrendered is nothing but the peak credit in respect of 2 \ concerns i.e. M/s Ruchita Enterprises M/s Antima Corporation, which were already part of addition made in original assessment order. Hence, in effect, the appellant had asked for relief in respect of cash credit from 3rd concern i.e. M/s Deepak Corporation, based on certain explanation which was accepted by the AO, There was no plausible explanation available with the assessee in respect of M/s Ruchita Enterprises M/s Antima Corporation, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 180 (SC). The assessee has also relied upon the decision of Hon ble Bombay High Court, in the case of CIT vs Samson Perinchery in ITA No. 1154/Mum/2015, dated 05/12/2017. 7. The Ld. DR on the other hand, strongly supporting order of the Ld.CIT(A) submitted that the additional grounds of appeal filed by the assessee should not be admitted, because the assessee has not adduced any reasons for not taking the ground challenging the validity of penalty proceedings before the Ld.CIT(A). If at all, the additional grounds of appeal is admitted, then the appeal may be set aside to the file of the Ld.CIT(A) to decide the issue of legality of notice issued u/s 274 r.w.s 271 of the I.T.Act, 1961. As regards, penalty levied on additions towards unexplained cash credits u/s 68 of the Act, the facts brought out by the Ld. AO, as well as the Ld.CIT(A) are very clear, the assesee has surrendered addition towards unexplained cash credit on the basis of peak credit, when it was not able to substantiated its claim of unsecured loans taken from various parties, in light of provisions of section 68 of the I.T.Act, 1961. Therefore, there is no error in the findings recorded by the ld.CIT(A), while con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one limb and levied under different limb, then the whole penalty proceedings become vitiate. Further the Ld. AO has to arrived at clear satisfaction regarding the limb under which, he proposed to levy penalty before issue of notice u/s 274 r.w.s 271(1)(c) of the Act. This legal proposition is supported by the decision of Hon ble Karnataka High court in the case of CIT vs. Manjunatha cotton Ginning Factory (supra) and was upheld by the Hon'ble Supreme court, in the case of CIT vs M/s SSA's Emerald Meadows (supra). Hon ble Jurisdiction Bombay High court in the case CIT vs Samson Perinchery (supra) has held that if notice issued for one limb and penalty levied for another limb then, the whole proceedings become void ab-inito and liable to be quashed. In this case, on perusal of facts, we find that the Ld. AO has failed to arrive at clear satisfaction, as regards, the limb under which the proposed penalty proceedings has been initiated and said lapse was even continued in the order imposing penalty. Therefore, we are of the considered view that the order imposing penalty passed by the Ld. AO u/s 271(1)(c) of the Act is illegal and bad in law. Therefore, we quashed penalty ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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