2018 (9) TMI 1947 - AT - Income Tax

Penalty u/s.271AAA - deduction u/s.80IA(4) disallowed - additional income in the returns filed in response to notice u/s.153A - non recording of satisfaction - HELD THAT - On satisfaction issue, we find the AO initiated the penalty proceedings u/s.271AAA for the default of concealing the particulars of income whereas the penalty was actually levied for undisclosed income detected by the Revenue by way of action u/s.132 of the Act . This manner of recording of satisfaction suggests the existence of ambiguity in the mind of the AO and the resultant penalty order is unsustainable in law legally. AO is under obligation to specify the correct default at the time of initiation as well as at the time of levy of penalty uniformly. For this proposition, we rely on the binding judgments in the case CIT Vs. Shri Samson Perinchery 2017 (1) TMI 1292 - BOMBAY HIGH COURT as well as CIT Vs. Manjunatha Cotton and Ginning Factory , 2013 (7) TMI 620 - KARNATAKA HIGH COURT As perused the order of Pune Bench of the Tribunal in the case of Shri Vikas Bapurao Takawane 2017 (7) TMI 1139 - ITAT PUNE In this case, we find the Tribunal had an occasion to deal with an identical issue as held there was ambiguity and vagueness in the mind of Assessing Officer with regard to the charge and the provisions under which penalty is to be levied. As a result, the notice levying penalty is also ambiguous and hence bad in law. We do not find any infirmity in the impugned order deleting penalty u/s.271AAA - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty under section 271AAA of the Income Tax Act, 1961 for Assessment Year 2012-13.

Analysis:

1. Background and Facts:
The appellant, a construction company, faced a search under section 132 of the Income Tax Act in 2011 and declared additional income of ?25 crores for the relevant assessment year. Despite claiming a deduction under section 80IA(4) of the Act, the Assessing Officer disallowed the deduction and imposed a penalty under section 271AAA, eventually amounting to ?2,78,48,625.

2. Grounds of Appeal:
The appellant contested the penalty on the grounds that there was no undisclosed income after the CIT(A) order and that the penalty order lacked proper satisfaction from the Assessing Officer. Additional legal grounds were raised, questioning the validity of the penalty order issuance.

3. Contentions and Arguments:
The appellant's counsel argued that the penalty was initiated based on ambiguity, as the AO cited concealment of income but levied the penalty for undisclosed income detected during the search. Emphasis was placed on the definition of "undisclosed income" under section 271AAA and the necessity for clear satisfaction by the AO.

4. Legal Precedents and References:
The appellant relied on various legal precedents, including court decisions and tribunal orders, to support the admission of additional legal grounds and the ambiguity in penalty initiation and levy.

5. Tribunal's Decision:
After considering the arguments and legal references, the Tribunal admitted the additional grounds for adjudication. It found that the penalty order suffered from ambiguity, as the AO failed to specify the correct default uniformly. Relying on legal judgments, including the CIT vs. Shri Samson Perinchery case, the Tribunal concluded that the penalty was unsustainable in law due to the AO's unclear satisfaction.

6. Outcome and Conclusion:
The Tribunal quashed the penalty order on legal grounds alone, directing the AO to delete the penalty. The regular grounds on merits were dismissed as academic, and the appeal was partly allowed based on technicalities.

In conclusion, the Tribunal's decision highlighted the importance of clear satisfaction and uniformity in penalty initiation and levy under section 271AAA of the Income Tax Act, ultimately leading to the penalty being set aside on legal grounds.