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P. K. Cotton Mills Pvt. Ltd. C/o. RRA Tax India, D-28, South Extension, Part-1, New Delhi Vs. Pr. CIT Meerut, Uttar Pradesh
April, 21st 2021

1 ITA No. 6039/Del/2017

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: ‘F’ NEW DELHI

BEFORE SHRI R. K. PANDA ACCOUNTANT MEMBER
AND

MS SUCHITRA KAMBLE, JUDICIAL MEMBER

I.T.A. No. 6039/DEL/2017 (A.Y 2008-09)
(THROUGH PHYSICAL HEARING)

P. K. Cotton Mills Pvt. Ltd. Vs Pr. CIT

C/o. RRA Tax India, D-28, Meerut,

South Extension, Part-1, New Uttar Pradesh

Delhi

AADCP4270D

(APPELLANT) (RESPONDENT)

Appellant by Dr. Rakesh Gupta, Adv
Respondent by Sh. Mahesh Thakur, Sr. DR

Date of Hearing 06.04.2021

Date of Pronouncement 20.04.2021

ORDER
PER SUCHITRA KAMBLE, JM

This appeal is filed by the assessee against order dated 25/07/2017
passed by CIT(A), Meerut for assessment year 2008-09.

2. The grounds of appeal are as under:-

“1. That having regard to the facts and circumstances of the case, Ld. Pr.CIT
has erred in law and on fact in imposing penalty u/s 271(l)(c) of
Rs.33,62,420/- i.e. @ 200% and that too without assuming jurisdiction as per
law and the impugned penalty order being illegal and void ab-initio and
without considering the submissions of assessee and without observing the
principles of natural justice.
2. That in any case and in any view of the matter, action of Ld. Pr.CIT in
imposing penalty of Rs.33,62,420/- u/s 271(l)(c) and that too @ 200%, is bad
in law and against the facts and circumstances of the case.
2 ITA No. 6039/Del/2017

3. That having regard to the facts and circumstances of the case, Ld. Pr.CIT
has erred in law and on facts in imposing penalty u/s 271(l)(c) of
Rs.33,62,420/- and that too without recording mandatory “satisfaction” as
per law.

Additional grounds of appeal
1. “That having regard to the facts and circumstances of the case, Ld. Pr. CIT
has erred in law and on facts in imposing penalty and passing the impugned
penalty order more so when the charge on penalty notice dated 18.03.2013
was not specified as to whether penalty is being initiated for “concealment of
income” or for “furnishing inaccurate particulars of income”.
2. That in any case and in any view of the matter, action of Ld. Pr. CIT in
imposing penalty and passing the impugned penalty order more so when the
penalty notice dated 18.03.2013 is invalid is illegal, bad in law, void ab initio
and against the facts and circumstances of the case.
3. That having regard to the facts and circumstances of the case, the
impugned penalty order u/s 271(1)(c) of the Income Tax Act, 1961 passed by
Ld. Pr. CIT is barred by limitation.”

3. The assessee filed return of income at Loss of Rs. 1,75,55,380/-.
Assessment was completed u/s 143 (3) of the Income Tax Act, 1961 on
26/11/2010 by the Assessing Officer at loss of Rs. 1,74,92,383/-, after

making addition of Rs. 41,253/- and Rs. 21,744/- on account of different
expenses. The CIT observed that assessment was done by the Assessing
Officer without proper enquiry and thus consequently passed order u/s 263

dated 18/3/2013. The assessment order dated 26/11/2010 was partly
amended on the issue of wrong claim of loss on sale of plant and machinery at
Rs. 49,46,196/- and partly set aside for fresh order by the Assessing Officer
on the issue of huge loss of Rs. 1,75,74,887/- on total turnover of Rs.

1,69,62,106/- as the same is collusive in nature relating to transaction of sale
of machinery, claim of depreciation of Rs. 28,23,005/- along with loss of Rs.
49,46,196/- debited to profit and loss account on sale of plant and machinery,

claim of financial charges, unsecured loan of Rs. 30 lac Sundry Creditors of
Rs. 7,16,533/- and possession of TDS of freight of Rs. 6,93,425/-.
Consequently, the assessment order u/s 263/143(3) was passed by the

Assessing Officer on 28/3/2014 on total income of Rs. 95,10,830/-. Penalty
3 ITA No. 6039/Del/2017

notice u/s 271(1)(c) was also issued on 18/3/2013. In the meanwhile, the
assessee went in appeal before the Tribunal against the order u/s 263 and the
Tribunal vide order dated 18/11/2016 in ITA No. 2055/Del/2013 dismissed
the appeal of the assessee. Thus, the addition of Rs. 49,46,196/- was also
confirmed which was made by the CIT u/s 263. The show cause notice u/s
271(1)(c) was again issued on 17/2/2017 requiring it to show cause as to why
an order imposing a penalty upon the assessee should not be passed, but the
specific limb was not struck off by the Revenue Authorities. Vide order dated
25/7/2017, the Commissioner of Income Tax imposing penalty of Rs.
33,62,420/- equal to 200% thereby held that the assessee has concealed its
income and furnish inaccurate particulars of income.

4. Being aggrieved by the penalty order, the assessee filed appeal before the
CIT(A). The CIT(A) dismissed the appeal of the assessee.

5. The Ld. AR submitted that the additional grounds are raised as a matter
of abundant caution though all grounds are covered in main appeal memo. The
penalty @ 200% u/s 271(l)(c) was imposed by Pr. CIT which is being contested
on the ground that the initiation of penalty is bad in law for the reason that
penalty notice is vague as it does not specify the charge of penalty that whether
the same is being levied for “concealment of particulars of income or furnishing
inaccurate particulars of income”. The Ld. AR relied upon the following judicial
decisions:

a) CIT vs. M/s SSA’s Emerald Meadows, SLP No. 232 72/2016, dated
05.08.2016 (SC)

b) CIT vs. M/s SSA’s Emerald Meadows, ITA No. 380/2015, dated
23.11.2015 (Kar. HC)

c) Pr. CIT vs. Sahara India Life Insurance Company Ltd, ITA 475/2019,
426-427/2019 and 429/2019, dated 02.08.2019 (Del HC)

d) Pr. CIT vs. Smt. Baiseity Revathi, I.T.T.A No. 684/2016, dated
13/07/2017 (AP HC)
4 ITA No. 6039/Del/2017

e) Meherjee Cassinath Holdings Pvt. Ltd. vs. ACIT, ITA No.
2555/Mum/2012, dated 28.04.2017 (Mum Tri.)

f) Bhushan Uttamrao Bachchav vs. ITO, ITA No. 989/Pun/2017, dated
09.07.2019 (Pune Tri.)

g) Shri Phool Singh vs. ITO, ITA No. 744/Del/2016, dated 03.05.2018 (Del
Tri.)

The Ld. AR further submitted that even penalty order of Pr. CIT dated
25.07.2017 in para 13 sought to impose penalty for both the charges, which is
bad in law as held in the following judicial decisions:

• New Sorathia Engineering Co. vs. CIT, (2006) 282 ITR 0642 (Guj)

• CIT vs. Manjunatha Cotton and Ginning Factory, (2013) 359 ITR 0565

(Kar)

• ITO vs. Lachman Das Bhatia, ITA No. 1029/Del/2012, dated 04.09.2017

(Del)
The Ld. AR further submitted that impugned penalty order passed is barred by
limitation in view of the provision of section 275(1)(b) as the penalty order
could be passed within 6 months from the end of the month in which revision
order was passed as provided in section 275(1)(b) and as provided in CBDT
circular no. 7 of 2003 dated 05.09.2003. The Ld. AR submitted that impugned
penalty order has been passed on 25.07.2017 whereas the order of the
Tribunal bearing ITA No. 2055/Del/2013 was passed on 18.11.2016 & served
on DR on 06.12.2016 as per the reply received under RTI from the Tribunal
and hence penalty could be imposed on or before 30.06.2017 as per section
275(l)(a) of the Act. The Ld. AR relied upon the decision of the Hon’ble High
Court of Delhi in the case of CIT vs. Odeon Builders Pvt. Ltd., (2017) 393 ITR
0027(Del)(FB). The Tribunal in quantum has deleted the addition with
reference to which impugned penalty was imposed vide order dated 17.12.2019
in assessee’s own case bearing ITA No. 2504/Del/2016 passed against the
order u/s 263/143(3), deleting the addition of Rs. 49,46,196/- . Even on merits
penalty is not imposable as income has been estimated at 5%. The Ld. AR
5 ITA No. 6039/Del/2017

relied upon the decision of Hon’ble Apex Court in case of CIT vs. Reliance
Petroproducts (P) Ltd., (2010) 322 ITR 0158 (SC). Without prejudice to above,
the Ld. AR submitted that there is no reason furnished for imposing penalty of
200%.

6. The Ld. DR relied upon the penalty order and submitted that the
Commissioner of Income Tax has rightly imposed penalty as per the provisions
of Section 271(1)(c). The Ld. DR further submitted that the penalty order with
respect to addition of Rs. 49,46,196/- was made on account of wrong claim of
loss on sale of plant and machinery to the total income of the assessee vide
order u/s 263 dated 18.03.2013 issued by the CIT. The said addition was
sustained by the Tribunal vide order dated 18.11.2016 in ITA No.
2055/Del/2013. Subsequently to the said order of the Tribunal, penalty order
dated 25.07.2017 was passed by the CIT imposing penalty of Rs. 33,62,420/-
under Section 271(1)(c). The Ld. DR submitted that the plea of the Ld. AR that
specific limb while levying penalty u/s 271(1)(c) was not specified does not hold
any substance, as from the perusal of the penalty notice dated 18.03.2013, it
can be seen that the CIT has ticked the ground pertaining to concealment of
income, thus, implying that the penalty levied was on account of concealment
of income. It is not mandatory that one of the grounds should be struck off,
even placing tick mark in front of the relevant ground serves the purpose. The
Ld. DR relied upon the following decisions:

a) Vijay Agarwal vs. DCIT (ITA No. 5434 & 5435/Del/2016 2019-TOIL-
1628-ITAT-Del)
b) Sundaram Finance Ltd. vs. CIT (2018) 99 taxmann.com 152 (SC)
c) Sundaram Finance Ltd. vs. CIT (2018) 93 taxmann.com 250 (Mad. HC)
d) CIT vs. Smt. Kaushalya (1995) 216 ITR 660 (Bom)
e) New Holland Tractors (India) P. Ltd. vs. CIT (2015) 275 CTR 291(Del)
f) Trimurti Engineering Works vs. ITO (2012) 138 ITD 189 (Del)
6 ITA No. 6039/Del/2017

g) Hybrid Rice International Pvt. Ltd. vs. CIT (ITA No. 285/Del/2007)
h) Earthmoving Equipment Service Corporation vs. DCIT (2017) 166 ITD
113 (Mum Tri.)
i) DCIT vs. Shah Rukh Khan (2018) 93 taxmann.com 320 (Mum Tri.)
j) Dhanraj Mills Pvt. Ltd. vs. ACIT ITA No. 3830 & 3833/Mum/2009.

The Ld. DR further submitted that the penalty order passed by the CIT is
within the time frame laid down in Section 275 of the Income Tax Act, 1961
and was not barred by limitation. Since, the assessee had gone in appeal
before the Tribunal against the order u/s 263 of the CIT, the penalty order was
passed rightly by the CIT after the order of the Tribunal and the said order was
passed before the end of six months as laid down in Section 275(1)(a). The Ld.
DR further submitted that the contention of the Ld. AR that as per Section
275(1)(b), penalty order was to be passed by the CIT before the expiry of six
months from the end of the month in which such order of revision under
Section 263 is passed and thus, the same is barred by limitation, is not
justified as there was appeal filed by the assessee against the order u/s 263
and the Circular No. 7 of 2003 dated 05.09.2003 relied upon by the Ld. AR
does not have any bearing on the present case. The Ld. DR further submitted
that the reliance by the ld. AR on the decision of the Hon’ble High Court in
case of Odeon Builders Pvt. Ltd. (supra) is not relevant as the facts are
different. Thus, the Ld. DR opposed the additional grounds as well as prayed
that the present appeal be dismissed.

7. We have heard both the parties and perused the material available on
record. It is pertinent to note that the actual limb of Section 271(1)(c) is not
mentioned by the Assessing Officer and from the perusal of the penalty order
it can be seen that the reasoning and satisfaction imposing penalty is not as
per the provisions of penalty under Income Tax Statute. As per the Ld. AR on
merit as well the penalty cannot be levied and when we have seen the order of
7 ITA No. 6039/Del/2017

the Tribunal confirming the addition made by the Commissioner of Income

Tax, it appears that the same does not tantamount for imposing penalty as the

assessee was under bonafide belief while not quantifying the said amount in

the income of the assessee. In fact, the Tribunal in quantum has deleted the

addition with reference to which impugned penalty was imposed vide order

dated 17.12.2019 in assessee’s own case bearing ITA No. 2504/Del/2016

passed against the order u/s 263/143(3), deleting the addition of Rs.

49,46,196/-. The Tribunal held as under:

“(D) The second issue before us, is regarding the aforesaid addition of

Rs. 49,46,196/-. The Ld. Counsel for assessee contended that the aforesaid

addition amounts to double addition of the same amount. He drew our

attention to the fact that the entire loss claimed by the assessee has been

disallowed by the AO and the profit of Rs. 8,48,105/- has been brought to tax

on account of estimation of business profit. The aforesaid amount of Rs.

49,46,196/- was part of the business loss claimed by the assessee and once

that loss is disallowed, and estimated net profit is assessed as income; the

aforesaid amount of Rs. 49,46,196/- stands disallowed automatically.

Therefore, the Ld. Counsel for the assessee submitted that there was no

justification for once again making repeated addition on the aforesaid amount

of Rs. 49,46,196/- in the Assessment Order. The Ld. DR agreed that the

repeated addition made by the AO in respect of the aforesaid amount of Rs.

49,46,196/- amounts to double addition of the same amount and he left it to

the discretion of the Bench to give appropriate direction to the AO for deleting

the double addition. As both sides are in agreement that repeated addition of

Rs. 49,46,196/- made by the AO amounts to double addition of the same

amount; we accordingly direct the AO to delete the repeated addition,

because double addition of the same amount is not sustainable in law.”

Thus, the addition upon which the penalty is imposed no longer sustains and

hence, the penalty also does not survive. Hence, the appeal of the assessee is

allowed.
8 ITA No. 6039/Del/2017

8. In result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on this 20th Day of April, 2021

Sd/- Sd/-
(R. K. PANDA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER
JUDICIAL MEMBER
Dated : 20/04/2021

R. Naheed *

Copy forwarded to:

1. Appellant
2. Respondent
3. CIT
4. CIT (Appeals)
5. DR: ITAT

ASSISTANT REGISTRAR
ITAT NEW DELHI
9 ITA No. 6039/Del/2017

Date of dictation 07.04.2021
07.04.2021
Date on which the typed draft is placed before the dictating 20.04.2021
Member 20.04.2021
20.04.2021
Date on which the typed draft is placed before the Other 20.04.2021
Member 20.04.2021
20.04.2021
Date on which the approved draft comes to the Sr. PS/PS

Date on which the fair order is placed before the Dictating
Member for pronouncement

Date on which the fair order comes back to the Sr. PS/PS

Date on which the final order is uploaded on the website of
ITAT

Date on which the file goes to the Bench Clerk

Date on which the file goes to the Head Clerk

The date on which the file goes to the Assistant Registrar
for signature on the order

Date of dispatch of the Order

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