2018 (4) TMI 1682 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - non specification of charge - Addition of bogus purchase - HELD THAT - A perusal of the notice issued u/s 274 r.w.s. 271 shows that the Assessing Officer has not struck off the improper words. A perusal of the assessment order shows that the AO has initiated penalty proceedings for furnishing of inaccurate particulars of income. The order u/s 271(1)(c) also shows that the penalty has been levied for furnishing of inaccurate particulars of income. The notice issued u/s 274 r.w.s. 271 shows that the Assessing Officer has not struck off the improper words in the said notice. Therefore following the decision in the case of M/s SSA S Emerald Meadows 2016 (8) TMI 1145 - SUPREME COURT that the very initiation of penalty proceedings is bad in law since the notice issued by the AO u/s 274 r.w.s. 271 does not specify under which limb of section 271(1)(c) the penalty proceedings has been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income - penalty sustained by the ld. CIT(A) in the instant case is not justified. - Decided in favour of assessee.

Summary

Issues involved:
Levy of penalty under section 271(1)(c) of the I.T. Act, 1961 based on bogus purchase addition.

Detailed Analysis:

1. Penalty under section 271(1)(c):
The appeal was against the penalty of ?62,798 imposed by the Assessing Officer under section 271(1)(c) of the I.T. Act, which was confirmed by the CIT(A). The penalty was initiated due to an addition of ?6,09,463 on account of bogus purchase made by the Assessing Officer. The CIT(A) sustained an addition of ?1,21,896, and the Tribunal dismissed the appeal due to a delay in filing. The Assessing Officer relied on various decisions and explanations were rejected, leading to the imposition of the penalty.

2. Arguments and Submissions:
The appellant argued that the delay in filing the appeal should not warrant the penalty, especially when similar additions were deleted in other cases. The appellant also pointed out defects in the penalty notice issued by the Assessing Officer, citing the case law where the Supreme Court upheld that a notice must specify the grounds for penalty under section 271(1)(c).

3. Judicial Analysis:
The Tribunal analyzed the case in light of previous decisions and found similarities with a case where re-assessment proceedings were quashed. The Tribunal noted that the reasons recorded by the Assessing Officer were similar to the quashed case, indicating a possible flaw in the penalty imposition. Additionally, the Tribunal highlighted the improper words not being struck off in the penalty notice, which was crucial in determining the specific grounds for penalty under section 271(1)(c).

4. Decision and Ruling:
After considering all arguments and precedents, the Tribunal held that the penalty sustained by the CIT(A) was not justified. The Tribunal directed the deletion of the penalty, citing the lack of proper specification in the penalty notice and similarities with previous cases where penalties were not upheld. Consequently, the appeal filed by the assessee was allowed, and the penalty was set aside.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal and directing the deletion of the penalty imposed under section 271(1)(c) of the I.T. Act, 1961, based on the analysis of the case facts, arguments presented, and relevant legal precedents.