2018 (12) TMI 1810 - AT - Income Tax

Penalty proceedings u/s 271(1)(c) - addition u/s 56(vi) - gift received on marriage anniversary - HELD THAT - AO has not recorded valid satisfaction in order to initiate the penalty proceedings u/s 271(1)(c). Perusal of assessment order shows that the Assessing Officer has merely recorded that action u/s 271(1)(c) is initiated on this score . From the entire assessment order it is not discernible as to under which of the limb of Section 271(1)(c) the penalty is being initiated. Even in the penalty order the Assessing Officer has failed to point out as to whether the penalty has been levied for concealment of particular of income or for furnishing inaccurate particulars of income by the assessee. It is settled principle of law that in order to initiate the penalty proceedings the Assessing Officer is required to make the assessee aware as to whether there is a concealment of income or furnishing of inaccurate particulars of income on her part, which is entirely missing in this case. In a case cited as CIT vs. Manjunatha Cotton and Ginning Factory Ors. 2013 (7) TMI 620 - KARNATAKA HIGH COURT confirmed by the Hon ble Supreme Court, held that when the assessee has not been specifically charged as to whether there is concealment of income or furnishing inaccurate particulars of income on her part, the penalty u/s 271(1)(c) is not sustainable. Merely making inaccurate claim does not amount to furnishing of inaccurate particulars. When the assessee has categorically claimed that the amount of ₹ 2,12,000/- has been received by her as a gift on her marriage anniversary, which has been disallowed by the AO but subsequently partly accepted by Ld. CIT(A) who has given relief to the extent of ₹ 1,38,000/-, it cannot be said that it is furnishing of inaccurate particulars of income. Reliance in this regard is placed on decision rendered by Hon ble Apex Court cited as Reliance Petro Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT Following the law laid down by Hon'ble High Court, we are of the considered view that when the assessee has not been specifically made aware of the charges leveled against her as to whether there is a concealment of income or furnishing of inaccurate particulars of income on her part, the penalty u/s 271(1)(c) of the Act is not sustainable. - Decided in favour of assessee.

Summary

Issues:
- Confirmation of penalty u/s 271(1)(c) by Ld. CIT(A)
- Validity of penalty initiation by AO
- Concealment of income or furnishing inaccurate particulars of income
- Sustainability of penalty u/s 271(1)(c)

Confirmation of penalty u/s 271(1)(c) by Ld. CIT(A):
The appellant sought to set aside the order confirming the penalty of ?25,000 imposed by the AO under section 271(1)(c) for the assessment year 2007-08. The Ld. CIT(A) upheld the penalty without considering the facts and circumstances of the case, leading to the appeal before the Tribunal.

Validity of penalty initiation by AO:
The AO initiated penalty proceedings under section 271(1)(c) based on the addition of ?2,12,000 in the assessment, alleging that the assessee concealed income. However, the initiation lacked a valid satisfaction as it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars.

Concealment of income or furnishing inaccurate particulars of income:
The Tribunal analyzed whether the assessee concealed income or furnished inaccurate particulars during assessment proceedings. It was observed that the AO failed to specify the grounds for penalty initiation, as required by law. The High Court precedent emphasized the necessity of informing the assessee about the charges for a sustainable penalty.

Sustainability of penalty u/s 271(1)(c):
The Tribunal referred to a Supreme Court decision stating that merely making an inaccurate claim does not equate to furnishing inaccurate particulars. Since the AO did not establish concealment or inaccurate particulars by the assessee, the penalty under section 271(1)(c) was deemed unsustainable. Consequently, the penalty levied by the AO and confirmed by the CIT(A) was deleted, and the appeal by the assessee was allowed.

This detailed analysis highlights the procedural flaws in penalty initiation, the legal requirements for sustaining penalties under section 271(1)(c), and the importance of specifying charges to the assessee. The judgment underscores the necessity of valid grounds for penalty imposition and adherence to legal principles for penalty sustainability.