2015 (11) TMI 1385 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - A perusal of sub-clause (iii) of section 271(1)(c) would indicate that in case an addition is being made to the income of an assessee, and it is established that the assessee has concealed or furnished inaccurate particulars qua that addition, then apart from tax to be payable by the assessee, he would pay an amount equivalent to the tax or three times of the tax as penalty under section 271(1)(c) of the Act. Meaning thereby, the penalty would be computed equivalent to the tax sought to be evaded by the assessee on the additions made to his income for which he has held guilty of concealment of income or furnishing of inaccurate particulars of income. In the present case, the moment, assessment order has been set aside by the ITAT, the very addition on which the amount of tax sought to be evaded was to be calculated, has been extinguished. Therefore, the assessee cannot be charged with allegation that he has concealed particulars or furnished inaccurate particulars on the additions which made to his income. In the set aside assessment order, it is yet to be decided whether any addition is to be made to the income of the assessee or not. It will be in the discretion of the AO to initiate or not initiate penalty proceedings after passing the fresh assessment order. Therefore, in the present proceedings penalty is not sustainable upon the assessee. We set aside both the orders and quash the imposition of penalty. It will be in discretion of the AO to initiate or not to initiate penalty after passing fresh assessment order in pursuance of the Tribunal s order - Decided in favour of assessee.

Summary

Issues:
Challenge to penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appellant contested the penalty of Rs. 3,23,11,350 imposed under section 271(1)(c) of the Income Tax Act, 1961, in relation to the assessment for the Asstt.Year 2003-04. The Assessing Officer (AO) had made significant additions to the income of the appellant, leading to the imposition of the penalty. The appellant's appeal to the CIT(A) did not result in relief. However, the Tribunal, in a previous order, set aside the additions made in the assessment year 2000-01, which formed the basis of the penalty. The Tribunal found that the appellant was prevented from filing an appeal due to liquidation proceedings, and hence, condoned the delay in filing the appeal. The Tribunal also highlighted that the appellant did not have a fair opportunity to present its case before the authorities. Consequently, the Tribunal allowed the appeal for statistical purposes, indicating that the penalty was not sustainable based on the circumstances.

The Tribunal emphasized that section 271(1)(c) of the Act imposes penalties for concealing income or furnishing inaccurate particulars. It noted that penalties are calculated based on the tax sought to be evaded due to the additions made to the income of the assessee. However, since the assessment order was set aside by the ITAT, the additions leading to the penalty were extinguished. As a result, the Tribunal ruled that the penalty could not be sustained as the question of whether any addition should be made to the income was yet to be decided. The Tribunal quashed the imposition of the penalty and left it to the AO's discretion to decide on initiating penalty proceedings after passing a fresh assessment order following the Tribunal's directive.

In conclusion, the Tribunal allowed the appellant's appeal, highlighting that the penalty under section 271(1)(c) was not sustainable in the given circumstances. The Tribunal's decision was based on the fact that the additions leading to the penalty were set aside, and the AO would need to reassess the situation before considering any penalties. The Tribunal's thorough analysis and consideration of the legal provisions resulted in the decision to quash the penalty, providing relief to the appellant in this case.