2019 (11) TMI 1629 - AT - Income Tax

Penalty u/s 271(1)(c) - Non recording of specific reason - Defective notice u/s 274 - HELD THAT - As perusal of the penalty order would indicate that the ld.AO has imposed penalty under section 271(1)(c) of the Act without recording any categorical finding, whether it is being imposed for concealment of income or furnishing inaccurate particulars of income - AO just in one-line held that penalty has been imposed for concealing true particulars of income and furnishing inaccurate particulars of income. Hon ble Gujarat High Court in the case of Snita Transport P.Ltd. 2012 (12) TMI 981 - HIGH COURT OF GUJARAT has propounded that the Assessing Officer ought to have recorded categorical finding for the breach for which he imposing penalty upon the assessee. In the penalty order he cannot use both the expression. While issuing show cause notice under section 274 r.w.s. 271(1)(c) of the Act for inviting explanation of the assessee, as to why penalty under section 271(1)(c) of the Act be not imposed upon the assessee, can use expression or between furnishing inaccurate particulars vis- -vis concealment of income. However, while adjudicating the issue regarding imposition of penalty, the ld.AO has to record a conclusive finding for which he is imposing the penalty, i.e. whether he is imposing penalty for furnishing inaccurate particulars of income or for concealment of income. The ld.AO cannot use phrase that penalty is being imposed for furnishing inaccurate particulars/concealment of income . Appeal of the assessee is allowed.

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act based on cash deposits in the assessee's bank account.

Detailed Analysis:

Issue 1: Imposition of Penalty
The Tribunal addressed the sole grievance of the assessee, which was the confirmation of the penalty of ?7,34,685 imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act. The AO initiated penalty proceedings after the assessee's explanation regarding cash deposits in the bank account was deemed unsatisfactory. The ld.CIT(A) also upheld the penalty. The Tribunal observed that the penalty was imposed without a categorical finding on whether it was for concealment of income or furnishing inaccurate particulars of income, as required by law. Citing a judgment of the Hon’ble Gujarat High Court, the Tribunal emphasized the necessity for the AO to make a specific finding on the nature of the breach for which the penalty is imposed. The Tribunal concluded that the penalty order lacked clarity and specificity, thus rendering it unsustainable. Consequently, the Tribunal canceled the penalty and allowed the appeal of the assessee.

Conclusion:
The Tribunal's judgment focused on the procedural aspect of penalty imposition under section 271(1)(c) of the Income Tax Act, emphasizing the importance of the AO clearly specifying the grounds for imposing the penalty. By highlighting the legal requirement for a conclusive finding on the nature of the breach, the Tribunal set aside the penalty imposed on the assessee, ultimately ruling in favor of the appellant.