2018 (11) TMI 1943 - AT - Income Tax

Penalty levied u/s 271(1)(c) - TP adjustment made to the international transaction - HELD THAT - As the quantum addition has been deleted by the Tribunal. Thus the penalty levied has no legs to stand. Considering the above stated position we dismiss the grounds raised by the Revenue. Penalty u/s 271(1)(c) - mandation to record satisfaction - HELD THAT - At the time of initiation of penalty proceedings in the assessment AO did not mention any limb of section 271(1) of the Act whereas at the time of levy of penalty the AO mentioned the limb stating that the assessee concealed the particulars of its income . This manner of recording of satisfaction suggests the existence of ambiguity with reference to applicability of specific limb. Therefore such penalty order is unsustainable in law legally. It is a settled legal proposition that the AO is under obligation to specify the correct limb at the time of initiation as well as at the time of levy of penalty. In view of the above deliberation on this issue without going into the merits of the penalty we are of the opinion that the penalty order is liable to be quashed on this legal issue. Thus the grounds raised by the Revenue are dismissed.

Summary

Issues:
1. Assessment Year 2007-08: Penalty under section 271(1)(c) for adjustment made to international transaction.
2. Assessment Year 2008-09: Penalty under section 271(1)(c) for adjustment to international transactions.

Assessment Year 2007-08:
The Revenue filed an appeal against the CIT(A)'s order deleting the penalty imposed under section 271(1)(c) for adjustments made to international transactions. The Tribunal noted that the TPO's jurisdiction was held invalid in a previous appeal, resulting in the deletion of the adjustment. The Tribunal emphasized that the TPO's order was without jurisdiction, rendering the subsequent penalty unsustainable. The Tribunal dismissed the Revenue's appeal, citing the deletion of the quantum addition by the Tribunal as a basis for rejecting the penalty.

Assessment Year 2008-09:
In this case, the AO initiated penalty proceedings under section 271(1)(c) for adjustments to international transactions. The CIT(A) deleted the penalty, prompting the Revenue to appeal. The Tribunal examined the satisfaction recorded by the AO for initiating and levying the penalty. It was observed that the AO failed to specify the limb of section 271(1)(c) at the initiation stage, creating ambiguity. Relying on legal precedents, the Tribunal concluded that the penalty order was unsustainable due to this legal flaw. Consequently, the Tribunal dismissed the Revenue's appeal, emphasizing the necessity for proper satisfaction at both stages of penalty proceedings.

In both cases, the Tribunal upheld the decisions of the CIT(A) to delete the penalties imposed by the AO, highlighting jurisdictional issues and legal deficiencies in the penalty orders as key reasons for dismissing the Revenue's appeals.