2018 (7) TMI 2033 - HC - Income Tax

Penalty levied u/s. 271(1)(c) - HELD THAT - On fair reading of section 275(1A) of the IT Act, it can be said that fresh penalty proceedings are permissible only with a view to give effect to the order of the higher Forum revising the assessment and a fresh penalty order can be passed and/or penalty can be imposed, enhancing, reducing or canceling the penalty or dropping the proceedings for the imposition of the penalty on the basis of the assessment as revised by giving effect to such order of the Commissioner (Appeals) etc. Therefore, in a case where the assessment was not required to be revised pursuant to the order passed by the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Hon'ble Supreme Court, as the case may be, the power under Section 275(1A) of the IT Act cannot be exercised and the fresh penalty proceedings cannot be initiated once earlier the penalty proceedings were dropped after considering the reply submitted by the assessee, as there is no revised assessment which is required to be giving effect to. CIT (A) as well as the learned Tribunal are justified in deleting the penalty imposed under Section 271(1)(c) faced with a situation that earlier the penalty proceedings were dropped after considering the reply submitted by the assessee and that thereafter the assessment was not required to be revised giving effect to the order passed by the CIT (A) as the learned CIT (A) simply confirmed the assessment order determining the income - we confirm the order passed by the learned Tribunal deleting the penalty under Section 271(1)(c) - No substantial question of law.

Summary

Issues:
1. Whether the Appellate Tribunal erred in law and on facts in deleting the penalty levied under Section 271(1)(c) of the Income Tax Act without appreciating the provisions in Section 275(1A) of the IT Act?

Analysis:
The case involves a dispute regarding the imposition of a penalty under Section 271(1)(c) of the Income Tax Act for concealment of income. A search conducted at the residential premises of an individual revealed undeclared income from the sale of land. The Assessing Officer initiated penalty proceedings, which were later dropped after the assessee filed a reply. However, a fresh penalty notice was issued after dismissal of an appeal by the CIT (A). The Revenue contended that Section 275(1A) allowed for the initiation of fresh penalty proceedings to give effect to the CIT (A)'s order. The High Court analyzed the provisions of Section 275(1A) and held that fresh penalty proceedings are permissible only when the assessment is revised based on a higher forum's order. Since the CIT (A) did not revise the assessment but merely confirmed it, the initiation of fresh penalty proceedings was deemed unjustified. The Court upheld the decisions of the CIT (A) and the Tribunal in deleting the penalty under Section 271(1)(c) as no revised assessment was required. Consequently, the Tax Appeal was dismissed, and no substantial question of law was found to arise.

This judgment clarifies the application of Section 275(1A) in the context of initiating fresh penalty proceedings post an appeal decision. It emphasizes that the power to impose a penalty must be exercised in alignment with revised assessments resulting from higher forum orders. In cases where the assessment remains unaltered, the initiation of new penalty proceedings after dropping earlier ones without revised assessments is deemed improper. The decision reaffirms the importance of aligning penalty imposition with revised assessments to ensure procedural fairness and adherence to legal provisions.