2018 (11) TMI 1853 - AT - Income Tax

Penalty u/s 271(1)(c) - as per assessee the AO has not recorded a firm conclusion in the penalty order whether it is being imposed for furnishing of inaccurate particulars of income or concealment of income - HELD THAT - While passing final order, the AO has to record a specific finding accepting the fact that penalty is being imposed for furnishing inaccurate particulars or concealment of income. After careful consideration of penalty order AO wished to impose penalty for furnishing inaccurate particulars of income and furnishing of inaccurate particulars of income. Both these situations contradictory to each other in the above order. Therefore, this order is not sustainable in view of decision of SNITA TRANSPORT (P.) LTD. VERSUS. ASSISTANT COMMISSIONER OF INCOME-TAX 2012 (12) TMI 981 - HIGH COURT OF GUJARAT . In view of the above discussion, penalty is not sustainable. We allow ground of appeal, and cancel penalty imposed by the AO. - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
1. The assessee appealed against the penalty imposed by the ld.CIT(A) under section 271(1)(c) of the Income Tax Act for the Assessment year 2005-06. The search action under section 132 revealed unexplained investments, leading to additions in the income. The ld.AO imposed a penalty of &8377; 1,80,000, which was confirmed by the CIT(A).

2. The main contention raised by the assessee was regarding the ambiguity in the penalty order. The AO did not clearly specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The assessee cited a judgment emphasizing the necessity for a clear finding in the penalty order. The AO's failure to provide a categorical conclusion was highlighted, while the Revenue authorities argued in favor of penalty for concealment of income.

3. The Tribunal referred to a judgment by the Hon’ble Gujarat High Court in a similar case, emphasizing the importance of a clear finding in the penalty order. The Court stressed that while the use of "and/or" in the notice for penalty might not be irregular, the AO must explicitly state the basis for imposing the penalty in the final order. The Tribunal analyzed the relevant paragraph of the penalty order, where the AO mentioned both concealment and furnishing inaccurate particulars without a clear distinction. This inconsistency rendered the penalty order unsustainable as per the High Court's decision.

4. Ultimately, the Tribunal concluded that the penalty was not sustainable due to the lack of a specific finding by the AO regarding whether it was imposed for concealment of income or furnishing inaccurate particulars. The appeal of the assessee was allowed, and the penalty imposed by the AO was canceled. The order was pronounced in Surat on 16th November 2018.