2013 (4) TMI 991 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of Section 271(1)(c) vs. Section 271AAA for penalty imposition.
2. Validity of penalty imposition under an incorrect section.
3. Jurisdictional challenge and curability under Section 292B.

Summary:

1. Applicability of Section 271(1)(c) vs. Section 271AAA:
The Assessee appealed against the penalty of Rs. 5,65,740/- u/s 271AAA for Assessment Year 2008-09. A search operation on 15.11.2007 revealed incriminating documents indicating unaccounted expenses. The Assessee initially denied the expenses but later surrendered Rs. 56,57,400/- on the condition of no penalty. The Assessing Officer initiated penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income. The Ld. CIT (A) observed that the correct provision for the year was Section 271AAA, not Section 271(1)(c), and reduced the penalty accordingly.

2. Validity of Penalty Imposition under an Incorrect Section:
The Assessee contended that the penalty u/s 271(1)(c) was void ab-initio as the applicable section was 271AAA. The Ld. CIT (A) noted that the Assessee did not object to the wrong section during the proceedings and deemed it a curable defect u/s 292B. However, the Tribunal found that Section 271AAA specifically excludes Section 271(1)(c) for undisclosed income, making the imposition under the wrong section unsustainable.

3. Jurisdictional Challenge and Curability under Section 292B:
The Tribunal held that jurisdictional issues can be raised at any stage and are not mere technical defects curable u/s 292B. Citing precedents, it was established that applying an inapplicable provision vitiates the order and cannot be transposed to the correct provision post-facto. The Ld. CIT (A) erred in holding that the penalty could be transposed to Section 271AAA, which was not invoked by the Assessing Officer.

Conclusion:
The Tribunal concluded that the penalty u/s 271(1)(c) was not sustainable and the Ld. CIT (A) overstepped by holding the Assessee liable under Section 271AAA. The order imposing the penalty was cancelled, and the Assessee's appeal was allowed.