2018 (11) TMI 1908 - AT - Income Tax

Penalty u/s 271(1)(c) - whether such penalty is being imposed for concealment of income or furnishing of inaccurate particulars of income? - AO has to record a specific finding exhibiting the fact that penalty is being imposed for furnishing inaccurate particulars or concealment of income - HELD THAT - A perusal of the above finding would indicate that in the first two lines, he wished to impose penalty for furnishing inaccurate particulars of income. Thereafter, he invoked Explanation 1 to section 271(1)(c) which provides that if any addition is being made to the total income of the assessee, for which the assessee failed to give any explanation or his explanation was found to be false, then qua that addition it will be deemed that the assessee has concealed income. Both these situations are contradictory to each other in the above order. Therefore, this order is not sustainable in view of decision of Hon ble Gujarat High Court 2012 (12) TMI 981 - HIGH COURT OF GUJARAT Similar finding in para-6 are being recorded in the cases of other two assesses. In view of the above discussion, penalties in the case of each assessee are not sustainable. We allow all three appeals, and delete penalty imposed by the AO. Decided in favour of assessee.

Summary

Issues:
Penalty imposition under section 271(1)(c) - Categorical finding required by AO - Concealment of income or furnishing inaccurate particulars - Applicability of Hon'ble Gujarat High Court decision - Sustainability of penalties.

Analysis:
The judgment by the Appellate Tribunal ITAT Surat involved three appeals challenging the penalty imposition under section 271(1)(c) by the ld.CIT(A) in the cases of three assesses. The main contention was the necessity for the Assessing Officer (AO) to provide a categorical finding whether the penalty was imposed for concealment of income or furnishing inaccurate particulars. The assessee's counsel relied on the Hon'ble Gujarat High Court decision in the case of Snita Transport P.Ltd. Vs. ACIT to support this argument. The AO's failure to clearly state the basis for imposing the penalty was highlighted, as it is crucial for the final order to specify the reason for penalty imposition.

The Tribunal examined the legal position as per the Hon'ble Gujarat High Court's decision in the case of Snita Transport, emphasizing the importance of the AO recording a specific finding while imposing penalties. The High Court clarified that while using the term "and/or" during the notice issuance might not be irregular, the absence of a clear finding by the AO regarding the reason for penalty imposition could invalidate the proceedings. The judgment stressed that the final order must explicitly state whether the penalty is for furnishing inaccurate particulars or concealing income.

In reviewing the penalty order for one of the assesses, the Tribunal found contradictions in the AO's reasoning. The AO initially indicated penalty imposition for furnishing inaccurate particulars but later invoked Explanation 1 to section 271(1)(c) regarding concealment of income. This inconsistency led the Tribunal to conclude that the penalty orders were not sustainable based on the Hon'ble Gujarat High Court's decision. Consequently, the Tribunal allowed all three appeals and revoked the penalties imposed by the AO.

In the final pronouncement, the Tribunal upheld the appeals of the assesses, emphasizing the necessity for the AO to provide a clear and specific basis for penalty imposition under section 271(1)(c). The judgment highlighted the importance of following established legal principles in determining and imposing penalties for income concealment or inaccurate particulars, as outlined by the Hon'ble Gujarat High Court.