2019 (9) TMI 1650 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - non striking or irrelevant portions - as argued at the time of levy of the penalty the order u/s 271(1)(c) clearly show that the assessee has furnished inaccurate particulars of income‟ in the first para of the penalty order and in the 3rd para of penalty order it is stated that the assessee has concealed the particulars of income - HELD THAT - In the show cause notice issued by the learned assessing officer u/s 274 read with section 271 (1) (c) none of the twin charges for initiating the penalty proceedings were struck off. Further, in the assessment order the penalty is initiated in the last para of the assessment order stating that the assessee has concealed the particulars of income and also submitted inaccurate particulars of its income. In the penalty order also at various paragraphs there is inconsistency with respect to the nature of default committed by the assessee. In paragraph number 1 the AO stated that assessee has furnished inaccurate particulars of his income. In paragraph number 3 AO states that assessee has concealed the particulars of income. In paragraph number 4 the AO states that the penalty is initiated for furnishing inaccurate particulars of income. We are of the considered view that when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. Even the AO has failed to apply his mind at the time of recording satisfaction at the time of framing assessment to initiate the penalty proceedings u/s 271(1)(c) of the Act as to under which limb of section 271(1)(c) i.e. for concealing particulars of income or furnishing inaccurate particulars of such income, penalty proceedings have been initiated rather written vague and ambiguous satisfaction recorded throughout the assessment order as well as penalty orders. - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty under section 271(1)(c) of the Income Tax Act - Inconsistency in charges of concealment and furnishing inaccurate particulars of income - Proper satisfaction for penalty initiation - Adjudication on additional ground challenging penalty proceedings.

Analysis:
The appeal was filed against a penalty imposed under section 271(1)(c) of the Income Tax Act for the Assessment Year 2009-10. The assessee was assessed for an undisclosed income, leading to a penalty of Rs. 41,41,114. The initial assessment order stated that the assessee concealed income and furnished inaccurate particulars, leading to the penalty initiation. The penalty was confirmed by the ld CIT (A) and challenged before the ITAT Delhi.

The Authorized Representative argued that there were inconsistencies in the charges raised by the assessing officer regarding concealment and inaccurate particulars of income. The Departmental Representative supported the lower authorities, citing a High Court decision confirming the addition of income. An additional ground challenging the penalty proceedings was raised by the assessee, but the ITAT decided to proceed based on the available facts.

Upon careful consideration, the ITAT noted inconsistencies in the penalty initiation process, where the assessing officer failed to specify the exact charge under which the penalty was initiated. Referring to judicial precedents, the ITAT emphasized the importance of clarity in specifying the charge under section 271(1)(c) for penalty proceedings to be sustainable. Citing the decision of the Honourable Delhi High Court in a similar case, the ITAT reversed the lower authorities' order and directed the assessing officer to delete the penalty.

In conclusion, the ITAT allowed the appeal filed by the assessee, emphasizing the necessity of proper satisfaction and clarity in specifying the charges under section 271(1)(c) for penalty initiation. The order was pronounced on 17/09/2019.