2016 (1) TMI 601 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - The penalty in dispute is not sustainable in the eyes of law, because the AO has not recorded any clear finding whether the assessee was guilty of concealment of income or furnishing of inaccurate particulars of income. Secondly, the notice u/s. 271(1)(c) has been issued to the assessee levying the penalty for furnishing of inaccurate particulars of income, whereas the penalty in dispute has been levied by the AO on account of concealment of true particulars of income by the assessee. In my view the penalty is not sustainable - Decided in favour of assessee.

Summary

Issues:
Penalty imposition for concealment of income, Violation of principles of natural justice in penalty proceedings, Discrepancy between initiation and imposition of penalty.

Analysis:
1. Penalty Imposition for Concealment of Income:
The case involved an appeal against a penalty order imposed under section 271(1)(c) of the Income Tax Act, 1961, for alleged concealment of income. The Assessing Officer (AO) had initially initiated the penalty for furnishing inaccurate particulars of income but later concluded that the assessee had concealed the true particulars of income. The Commissioner of Income Tax (Appeals) had partially allowed the appeal, reducing the penalty amount. However, the Appellate Tribunal found that the penalty imposition was not sustainable in law. The Tribunal observed that the AO and the CIT(A) had clearly found concealment of income by the assessee. Still, the penalty notice was issued for furnishing inaccurate particulars of income, creating a discrepancy. Citing a decision of the Gujarat High Court, the Tribunal held that the penalty for concealment of income without a clear finding was invalid. Consequently, the Tribunal deleted the penalty and ruled in favor of the assessee.

2. Violation of Principles of Natural Justice in Penalty Proceedings:
The appellant contended that the penalty proceedings were in violation of principles of natural justice as the charge against the assessee was ambiguous and vague. The notice for penalty mentioned both concealment of income and furnishing inaccurate particulars without specifying the exact contravention. The appellant argued that without a clear charge, no reasonable opportunity was given to defend against the allegations. The appellant relied on various court decisions to support the argument that vague penalty notices render the penalty unsustainable. The Tribunal considered this argument but primarily focused on the discrepancy between the initiation and imposition of the penalty, ultimately leading to the deletion of the penalty.

3. Discrepancy between Initiation and Imposition of Penalty:
The Tribunal closely examined the penalty notice issued by the AO, which was for furnishing inaccurate particulars of income. However, the penalty order concluded that the assessee had concealed the true particulars of income. This discrepancy in the nature of the charge and the penalty imposed raised a significant legal issue. The Tribunal emphasized the importance of a clear and specific charge to allow the assessee a fair opportunity to respond. Relying on legal precedents, including a decision of the Gujarat High Court, the Tribunal held that penalties imposed without a precise charge are unsustainable. Therefore, the Tribunal decided to delete the penalty, considering the discrepancy between the initiation and imposition of the penalty and the lack of a clear finding on the nature of the offense.

In conclusion, the Appellate Tribunal found the penalty imposed on the assessee for concealment of income unsustainable due to the discrepancy between the initiation and imposition of the penalty, leading to a violation of principles of natural justice. The Tribunal ruled in favor of the assessee, deleting the penalty and allowing the appeal.