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2016 (4) TMI 992 - AT - Income TaxLevy of penalty u/s 271(1)(c) - Held that - Assessing Officer has not recorded satisfaction specifically for concealed particulars of income or furnished inaccurate particulars of income and on both. The various courts have held that this satisfaction can be for both the purposes i.e. for concealed particulars of income and furnishing of inaccurate particulars of income jointly as both the satisfaction are overlapping, which is also not found place in the case before us. The Assessing Officer even has not ticked specific satisfaction in notice U/s 274 of the Act. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law. The assessee should know the ground which he has to meet specifically, otherwise, the principle of natural justice is offended on the basis of such proceedings, no penalty could be imposed to the assessee. Ticking of the penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law, therefore, we delete the penalty confirmed by the ld CIT(A). See CIT Vs M/s Manjunath Cotton & Ginning Factory & Ors 2013 (7) TMI 620 - KARNATAKA HIGH COURT - Decided in favour of assessee
Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Specificity in the notice issued under Section 271(1)(c). 3. Validity of penalty imposed based on the assessment order and subsequent proceedings. Detailed Analysis of the Judgment: 1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961: The primary issue revolves around the imposition of a penalty under Section 271(1)(c) of the Income Tax Act, 1961. The assessee was penalized for an amount of ?14,25,187/- for the assessment year 2005-06. The penalty was imposed due to the assessee's failure to disclose unaccounted income, which was identified during a search and seizure operation conducted by the department. The Assessing Officer (AO) had scrutinized the seized material and concluded that the assessee had undisclosed income amounting to ?42,25,000/-. This unaccounted income was not disclosed by the assessee in the return filed in response to the notice under Section 153A. The AO initiated penalty proceedings under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars of income. 2. Specificity in the Notice Issued under Section 271(1)(c): The assessee contended that the notice issued under Section 271(1)(c) did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. The notice merely mentioned both grounds without specifying the exact charge. The assessee argued that this lack of specificity violated the principles of natural justice, as it did not provide a clear ground on which the penalty was being imposed. The Karnataka High Court in CIT vs. M/s Manjunatha Cotton & Ginning Factory & Ors. held that a notice must be specific in indicating whether the penalty is for concealment of income or furnishing inaccurate particulars. The AO's failure to specify the exact charge in the notice was deemed insufficient to meet the legal requirement. 3. Validity of Penalty Imposed Based on the Assessment Order and Subsequent Proceedings: The assessee also argued that the AO did not record specific satisfaction for the initiation of penalty proceedings for the assessment year 2005-06, although such satisfaction was recorded for other years. The AO's satisfaction for initiating penalty proceedings was noted in the concluding paragraph of the assessment order, which stated, "Penalty notice u/s 271(1)(c) r.w.s. 274/275 is issued separately for concealment/furnishing of inaccurate particulars of income." The Delhi High Court in Madhu Shree Gupta vs. UOI held that the satisfaction for initiating penalty proceedings must be discernible from the assessment order. The Tribunal found that the AO did not record specific satisfaction for either concealment of income or furnishing inaccurate particulars of income, which is a prerequisite for imposing a penalty under Section 271(1)(c). Conclusion: The Tribunal concluded that the AO's failure to specify the exact charge in the penalty notice and the lack of specific satisfaction recorded for the assessment year 2005-06 rendered the penalty proceedings invalid. The Tribunal referenced various judicial precedents, including the Supreme Court's decision in Mak Data Ltd. vs. CIT and the Karnataka High Court's decision in CIT vs. M/s Manjunatha Cotton & Ginning Factory & Ors., to support its conclusion. Consequently, the penalty of ?14,25,187/- imposed under Section 271(1)(c) was deleted, and the appeal of the assessee was allowed. The Tribunal emphasized the importance of adhering to procedural requirements and ensuring that the assessee is adequately informed of the specific grounds for penalty to uphold the principles of natural justice.
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