2015 (10) TMI 2639 - AT - Income Tax

Penalty u/s 271(1)(c ) - income found in the locker - Held that - Concealment and furnishing inaccurate particulars are different. The AO while issuing notice has to come to the conclusion as to whether it is a case of concealment of income or whether it is a case of furnishing of inaccurate particulars. The Hon ble Apex Court in the case of T. Ashok Pai vs. CIT (2007 (5) TMI 199 - SUPREME Court) has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. As in the present case the penalty order does not make it clear as to whether the penalty has been imposed for concealing particulars of income or for furnishing inaccurate particulars of income we respectfully following the decision in the case of Commissioner of Income Tax & Another vs. Manjunatha Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT) wherein held that Notice u/s 274 of the Act should specifically state the grounds mentioned in section 271(1)(c) i.e. whether it is for concealment of income or for furnishing of inaccurate particulars of income. Sending printed form where all the ground mentioned in section 271 are mentioned would not satisfy requirement of law thus we hold that the penalty imposed u/s 271(1)(c) of the Act was improperly imposed by the AO - Decided in favour of assessee

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for concealment of income or furnishing inaccurate particulars.

Analysis:
The appeal was filed against the order deleting a penalty of Rs. 12 lacs imposed for concealment of income under section 271(1)(c) of the Income Tax Act, 1961. The assessee, an individual, had filed the return for AY 2006-07 without any notice under section 143(2). Subsequently, during a search and seizure action, income was found in a bank locker. The AO accepted the income disclosed under section 153A but imposed a penalty, alleging non-disclosure prior to the search. The CIT (A) deleted the penalty, stating that everything was shown in the return. The Department contended that the penalty deletion was incorrect as the income was declared post-discovery. The AR argued that the penalty order lacked clarity on the grounds for penalty imposition. The ITAT observed discrepancies in the notice, assessment order, and penalty order regarding the grounds for penalty. Citing legal precedents, the ITAT emphasized the need for clarity in penalty imposition between concealment and inaccurate particulars. Relying on a Karnataka High Court decision, the ITAT held the penalty was improperly imposed due to lack of clarity and upheld the CIT (A)'s decision.

The ITAT's decision was based on the lack of clarity in the penalty imposition regarding concealment or inaccurate particulars of income. The tribunal emphasized the importance of specifying the grounds for penalty in the notice and order. By citing legal precedents and the principle of natural justice, the ITAT concluded that the penalty was improperly imposed by the AO. The decision aligned with the Karnataka High Court's ruling, emphasizing the necessity for clear grounds for penalty imposition to ensure fairness and adherence to legal requirements. Ultimately, the ITAT dismissed the department's appeal, upholding the CIT (A)'s decision to delete the penalty.