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2016 (3) TMI 1024 - AT - Income TaxPenalty proceedings under section 271(1)(c) - Held that - The initiation and levy of the penalty should be on a specific charge otherwise the whole proceedings is bad in law and gets vitiated. This principle has been followed by the Tribunal in several cases. Before us, no contrary decisions of any other High Court have been brought to our notice, accordingly, we are of the view that the entire proceedings of initiation and levy of penalty under section 271(1)(c) is bad in law and hence, the penalty levied by the AO and as confirmed by the CIT(A) is quashed. - Decided in favour of assessee
Issues Involved:
1. Maintainability of the Departmental Appeals. 2. Legality of the penalty orders under section 271(1)(c). 3. Specificity of charges in penalty proceedings. Detailed Analysis: 1. Maintainability of the Departmental Appeals: At the outset, it was admitted by both parties that the tax effect in the Departmental appeals (ITAs No. 6330/Mum/2012 and 6328/Mum/2012) is below ?10 lakhs. In view of the latest CBDT Circular No. 21 of 2015, which prescribes a monetary limit for filing appeals before the Tribunal up to ?10 lakhs and applies retrospectively to pending appeals, these appeals are not maintainable. Consequently, the appeals filed by the revenue are treated as dismissed as non-maintainable. 2. Legality of the Penalty Orders under Section 271(1)(c): The assessee challenged the confirmation of penalties under section 271(1)(c) for ?8,79,597/- and ?8,93,937/-. The assessee argued that the penalty order is bad-in-law since the notice under section 274 r.w.s. 271(1)(c) was issued in a mechanical manner and did not specify the reason for the initiation of the penalty. The AIR Information indicated that the assessee had deposited significant cash amounts in their bank accounts, which were not initially offered for taxation. The assessee later revised their computation to include these amounts. The AO initiated penalty proceedings under section 271(1)(c) for concealing the particulars of income and furnishing inaccurate particulars of taxable income. The AO rejected the assessee's explanations and levied penalties far exceeding the minimum penalty. 3. Specificity of Charges in Penalty Proceedings: The assessee contended that the AO did not frame any specific charge for the penalty in the assessment order and mentioned both charges, which cannot be the case as they operate in different fields. In the notice issued under section 274 r.w.s. 271, the AO did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The penalty order eventually levied the penalty for concealing the particulars of taxable income. The assessee argued that such a penalty is untenable based on various judicial decisions, including the Karnataka High Court in CIT vs. Manjunatha Cotton and Ginning Factory, which mandates that the AO must specify the charge for penalty in the notice itself. The Tribunal agreed with the assessee, citing that the initiation and levy of penalty must be on a specific charge; otherwise, the entire proceedings are vitiated. The Tribunal quashed the penalties levied by the AO and confirmed by the CIT(A). Conclusion: The Tribunal dismissed the Departmental appeals as non-maintainable due to the tax effect being below ?10 lakhs as per the CBDT Circular No. 21 of 2015. It allowed the assessee's appeals, quashing the penalties under section 271(1)(c) due to the lack of specificity in the charges framed by the AO. The Tribunal emphasized that the penalty proceedings must clearly specify the grounds for the penalty to uphold the principles of natural justice. Order Pronounced: The order was pronounced in the open court on 18th March 2016.
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