2016 (7) TMI 1421 - AT - Income Tax

Penalty proceedings u/s 271(1)(c) - non specification of charge - Held that - No specific charge has been levied by the AO, therefore, delete the penalty imposed u/s 271(1)(c). In the result, the appeal of the assessee stands allowed.

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act for concealment of income and furnishing inaccurate particulars.
2. Requirement of specific charge for levying penalty under Section 271(1)(c).
3. Interpretation of "concealment of income" and "furnishing inaccurate particulars of income".

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The case involves the imposition of a penalty under Section 271(1)(c) of the Income Tax Act. The assessee filed a return showing an income of ?35,49,430, which was later assessed at ?43,02,840 after adding ?7,68,409 for unreported interest income. The Assessing Officer (AO) initiated penalty proceedings for concealment of income and furnishing inaccurate particulars. The penalty of ?5,74,111 was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].

2. Requirement of Specific Charge for Levying Penalty:
The judgment emphasizes that penalty under Section 271(1)(c) can be initiated for either concealment of income or furnishing inaccurate particulars, but not both simultaneously. The AO must clearly state the specific charge for which the penalty is being levied. The absence of a clear finding regarding the specific charge renders the penalty order invalid, as supported by the case of New Sorathia Engineering Co. Ltd. v. CIT.

3. Interpretation of "Concealment of Income" and "Furnishing Inaccurate Particulars of Income":
The judgment differentiates between "concealment of income" and "furnishing inaccurate particulars of income." Concealment refers to hiding or not disclosing income, while furnishing inaccurate particulars involves disclosing incorrect or false details. The AO must establish the specific nature of the default committed by the assessee. The case of CIT v. Reliance Petroproducts (P) Ltd. is cited, where the Supreme Court held that merely making an unsustainable claim does not amount to furnishing inaccurate particulars.

Findings and Conclusion:
The tribunal found that the AO did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The penalty order lacked clarity and did not meet the legal requirement of specifying the charge. Consequently, the penalty was deemed invalid. The tribunal deleted the penalty and allowed the appeal of the assessee, emphasizing the necessity of a specific charge for imposing penalties under Section 271(1)(c).

Supporting Judgments:
- New Sorathia Engineering Co. Ltd. v. CIT: Highlighted the necessity of a clear finding regarding the specific charge for penalty.
- CIT v. Rajan & Co.: Stressed the importance of proper application of mind and recording of opinion by the AO.
- CIT v. Reliance Petroproducts (P) Ltd.: Clarified that making an unsustainable claim does not amount to furnishing inaccurate particulars.
- CIT v. Manjunath Cotton & Ginning Factory: Reinforced the requirement of a specific charge for levying penalty.

Final Decision:
The tribunal set aside the order of the CIT(A) and deleted the penalty imposed under Section 271(1)(c) of the Income Tax Act, allowing the appeal of the assessee.