2018 (7) TMI 2132 - AT - Income Tax

Validity of SCN - Levy of penalty under section 271(1)(c) of the I.T. Act, 1961 - under which limb of Section 271(1)(c) of the I.T. Act, the penalty proceedings initiated, is not mentioned in the SCN - concealment of income/furnishing inaccurate particulars of income - Addition on account of deemed income - HELD THAT - The show cause notice issued before levy of the penalty is bad in law as it did not specify under which limb of Section 271(1)(c) of the I.T. Act, the penalty proceedings under section 271(1)(c) of the Act had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income - The issue is covered in favour of the assessee by the Judgment of the Hon ble Karnataka High Court in the case of COMMISSIONER OF INCOME TAX, BANGALORE AND THE INCOME TAX OFFICER, WARD-6 (3) , BANGALORE VERSUS M/S SSA S EMERALD MEADOWS 2015 (11) TMI 1620 - KARNATAKA HIGH COURT and confirmed by Hon ble Supreme Court in the case of COMMISSIONER OF INCOME TAX ANR. VERSUS M/S SSA'S EMERALD MEADOWS 2016 (8) TMI 1145 - SC ORDER . Therefore, the entire penalty proceedings under section 271(1)(c) of the Act are vitiated and penalty is liable to be cancelled. Addition on account of deemed income - HELD THAT - The addition on account of purchases made at the lesser value of the Circle rate is introduced into the Act in Section 56(2)(vii)(b) w.e.f. 01.04.2014, which is applicable for the first time to the assessment year under appeal. The addition is made by the A.O. on account of deeming provisions. The A.O. has not brought any positive evidence on record to show that assessee has concealed the particulars of income or furnished inaccurate particulars of income - In the similar circumstances, in case of addition made under section 50C of the I.T. Act, the ITAT, Delhi-B Bench in the case of THE INCOME TAX OFFICER WARD-28 (4) , NEW DELHI VERSUS SHRI AJAY SHARMA 2017 (11) TMI 1909 - ITAT DELHI confirmed the Order of the Ld. CIT(A) in cancelling the penalty. This is not a fit case for levy of the penalty - appeal allowed - decided in favor of assessee.

Summary

Issues:
Challenge against penalty under section 271(1)(c) of the I.T. Act, 1961 for the A.Y. 2014-2015.

Detailed Analysis:

1. Facts of the Case and Penalty Initiation:
The assessee, a civil contractor, declared income with a net profit against total turnover. An undisclosed investment in property led to the penalty initiation under section 271(1)(c). The assessee argued it was not concealment but a difference between circle rate and actual price.

2. Assessee's Arguments:
The assessee contended that the addition was due to deeming provisions, not concealment. Citing ITAT Delhi Bench's decision, the assessee argued that the notice for penalty lacked specificity, as per the Karnataka High Court ruling, making the penalty invalid.

3. Revenue's Arguments:
The Revenue upheld the penalty citing previous court decisions. The Revenue argued that since the assessee accepted the addition, the penalty was justified.

4. Judgment and Legal Analysis:
The Tribunal found no justification for the penalty, noting the invalidity of the show cause notice for not specifying the penalty's grounds. Referring to the deeming provision under section 56(2)(vii)(b), the Tribunal held that no positive evidence supported concealment. The Tribunal referenced a similar case under section 50C where the penalty was canceled due to lack of evidence.

5. Conclusion and Precedent:
The Tribunal emphasized the importance of disclosing all relevant facts to the tax authorities. It dismissed the Revenue's appeal, citing the absence of concrete evidence for concealment. The decision aligned with the Kolkata High Court ruling, emphasizing the need for evidence before imposing penalties. The Tribunal canceled the penalty, stating it was not a suitable case for penalty imposition based on the facts presented.

6. Final Verdict:
The Tribunal allowed the assessee's appeal, setting aside the penalty orders. The judgment highlighted the necessity of concrete evidence before penalizing taxpayers and emphasized the significance of disclosing all relevant information to tax authorities.