2014 (10) TMI 545 - HC - Income Tax

Deletion of penalty u/s 271(1)(c) Inaccurate particulars furnished or not - Income from cold storage Held that - Penalty notice was with regard to inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act and was not with regard to concealment of income relying upon Dilip N.Shroff Vs. Joint Commissioner of Income Tax, Mumbai and another 2007 (5) TMI 198 - SUPREME Court - No inaccurate details was furnished by the assessee with regard to the addition of amount of ₹ 35,03,011 - Insofar as inaccurate furnishing of details for the amount of ₹ 26,33,328/- is concerned, the amount was deleted by the Tribunal and, therefore, the question of imposing any penalty on this amount no longer survives - With regard to penalty on the amount of ₹ 35,03,011/-, the AO had added this amount as unexplained investment since the assessee could not produce any books of account - The penalty notice was with regard to furnishing of inaccurate particulars of income, which relates to furnishing of incorrect address - The penalty notice was not issued with regard to concealment of income - since the penalty notice was only confined to the furnishing of inaccurate particulars and was not with regard to concealment of income, the imposition of penalty for the unexplained deposit in Bank amounting to ₹ 35,03,011 could not be imposed - The Tribunal was justified in deleting this penalty Decided against revenue.

Summary

Issues:
1. Justification of ITAT in deleting penalty under Section 271(1)(c) for different reasons.
2. ITAT's deletion of penalty on technical grounds ignoring assessment and penalty orders.
3. ITAT's deletion of penalty under Section 271(1)(c) ignoring Section 273(B) exceptions.
4. Correctness of ITAT in setting aside Revenue authorities' orders for penalty imposition.

Analysis:
The appeal before the Allahabad High Court involved the Department filing under Section 260A of the Income Tax Act, 1961, challenging the deletion of penalties by the ITAT. The substantial questions of law raised pertained to the justification of ITAT's actions in deleting penalties under Section 271(1)(c) based on different reasons, technical grounds, and the provisions of Section 273(B) exempting penalties. The case revolved around an assessee, a company deriving income from cold storage, for the assessment year 2003-04. The Assessing Officer made additions to the income, notably &8377; 26,33,328 and &8377; 35,03,011 related to advances and loans. The ITAT deleted the first addition but confirmed the latter. Subsequently, penalties were imposed under Section 271(1)(c) for furnishing inaccurate particulars of income.

The penalty imposition was challenged by the assessee, leading to appeals and counter-appeals. The High Court analyzed the penalty notice, emphasizing the distinction between concealment and furnishing inaccurate particulars of income under Section 271(1)(c). Referring to legal precedents, the Court highlighted the necessity for clear delineation in penalty orders for either concealment or inaccurate particulars. It was noted that the penalty notice in this case specifically addressed inaccurate particulars, focusing on the failure to provide correct details regarding advances from farmers. The Court further cited judgments emphasizing that not every disallowed claim automatically attracts penalties under Section 271(1)(c).

In conclusion, the High Court upheld the ITAT's decision to delete the penalty related to the unexplained bank deposit, as the penalty notice only pertained to furnishing inaccurate particulars and not concealment of income. The Court found the ITAT's actions justified and dismissed the appeal, ruling in favor of the assessee. The judgment clarified the legal requirements for penalty imposition under Section 271(1)(c) and underscored the importance of adherence to statutory provisions and precedents in tax matters.