2022 (9) TMI 1499 - AT - Income Tax

Penalty u/s. 271(1)(c) - Defective notice - non striking of irrelevant portion - HELD THAT - As not only for the failure on the part of the AO to validly put the assessee bank to notice as regards the specific default for which penalty was sought to be imposed on it under Sec. 271(1)(c) of the Act reveals beyond doubt the invalid assumption of jurisdiction on his part; but also the fact that he had while culminating the assessment initiated the penalty proceedings for the reason that the assessee had concealed its income OR furnished inaccurate particulars of such income, but thereafter imposed the same vide his order passed u/s. 271(1)(c) of the Act, dated nil for both the defaults i.e. concealment of income and furnishing of inaccurate particulars of income, therefore, on the said count too the impugned penalty could not be sustained and is liable to be struck down. We, thus, for the aforesaid reasons not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set-aside the order of the CIT(A) who had not only upheld but in fact enhanced the same. Accordingly, the penalty imposed under Sec. 271(1)(c) - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of jurisdiction assumed by the AO under Sec. 271(1)(c) of the Income Tax Act.
2. Imposition of penalty for both defaults: furnishing inaccurate particulars of income and concealment of income.

Analysis of Judgment:

Issue 1: Validity of Jurisdiction Assumed by the AO under Sec. 271(1)(c) of the Income Tax Act:

The appeals filed by the assessee bank were against the orders passed by the CIT(Appeals) for the assessment years 2008-09 & 2010-11. The AO initiated penalty proceedings u/s. 271(1)(c) alleging that the assessee had concealed income or furnished inaccurate particulars. The Ld. Authorized Representative contended that the AO failed to specify the default for which the penalty was imposed. The AO imposed the penalty for both defaults but failed to differentiate between 'concealment of income' and 'furnishing of inaccurate particulars of income'. The Tribunal held that the AO's failure to specify the default and the imposition of penalty for both defaults without distinction rendered the penalty invalid. Citing relevant case law, the Tribunal quashed the penalty imposed by the AO and upheld by the CIT(Appeals).

Issue 2: Imposition of Penalty for Both Defaults: Furnishing Inaccurate Particulars of Income and Concealment of Income:

The Tribunal observed that 'concealment of income' and 'furnishing of inaccurate particulars of income' are distinct defaults. The AO, in this case, initiated penalty proceedings for both defaults but imposed the penalty without differentiating between them. The Tribunal held that such imposition of penalty for both defaults without distinction was unsustainable. Referring to legal precedents, the Tribunal set aside the penalties imposed by the AO and upheld by the CIT(Appeals) for both the assessment years 2008-09 and 2010-11.

In conclusion, the Tribunal allowed both appeals of the assessee, quashing the penalties imposed by the AO under Sec. 271(1)(c) of the Income Tax Act for both assessment years. The Tribunal's decision was based on the invalid assumption of jurisdiction by the AO and the improper imposition of penalties for distinct defaults without proper differentiation.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, legal reasoning applied, and the final decision rendered by the Appellate Tribunal in the case.