2016 (12) TMI 110 - AT - Income Tax

Penalty u/s 271(1)(c) - whether the AO can initiate penalty on the charge of furnishing of inaccurate particulars of income and levy on both charges of concealment of income and furnishing of inaccurate particulars of income? - Held that - There must be a precise charge and imposition of penalty must be on that footing only. In our view , before levying penalty on the assessee, the AO must apprise the assessee of the precise charge levelled against him. He must be told vividly whether he is guilty of concealment of income or for furnishing inaccurate particulars of income. Section 271(1)(c) r.w.s. 274 provides for a reasonable opportunity to be given to the assessee so that he can avail the opportunity to defend himself. Where the penalty proceedings are initiated on a particular footing or charge of concealment of income but final conclusion of levy of penalty is based upon some different footing altogether of concealment of income and also furnishing of inaccurate particulars of income, in that case it can not be presumed that the assessee has been given a reasonable opportunity of being heard before order imposing penalty is passed. In such case the imposition is not justified. Accordingly we set aside the order of CIT(A) and direct the AO to delete the penalty - Decided in favour of assessee

Summary

Issues:
Challenge to penalty u/s 271(1)(c) for AY 2008-09.

Analysis:
The appeal challenged the penalty imposed by the ld.CIT(A) for concealing income and furnishing inaccurate particulars. The assessee failed to appear during the hearing, leading to an ex-parte decision. The AO added amounts to the total income based on undisclosed bank accounts and discrepancies, resulting in a penalty of ?1,64,512. The First Appellate Authority upheld the penalty considering various precedents.

The key issue was whether the AO can initiate penalty for furnishing inaccurate particulars along with concealment of income. The Tribunal emphasized the need for a precise charge before imposing a penalty, ensuring the assessee is informed clearly. The AO must provide a reasonable opportunity for defense, specifying the charges of concealment or inaccurate particulars. If the penalty is imposed on different grounds than those initially charged, it violates the opportunity for a fair hearing. Thus, the Tribunal directed the AO to delete the penalty, as the imposition was not justified.

The Tribunal referred to legal interpretations regarding concealment of income and furnishing inaccurate particulars. The Supreme Court clarified that mens rea is not necessary for penalty, but a genuine explanation can prevent penalty imposition. Precedents highlighted the importance of voluntary disclosure and accurate particulars by taxpayers. Failure to disclose fully or truly all particulars of income can lead to penalty under section 271(1)(c) of the Act. The absence of explanation regarding income can be considered as concealment, justifying penalty imposition.

In this case, the penalty was based on unexplained cash deposits in an undisclosed bank account, which the appellant failed to justify. The Tribunal found the penalty justified due to the appellant's inability to substantiate the source of cash deposits. The Tribunal upheld the penalty based on concealment of income and inaccurate particulars. The appeal was allowed, and the penalty was directed to be deleted.

Therefore, the Tribunal's decision focused on the procedural fairness in penalty imposition, emphasizing the need for a clear charge and a reasonable opportunity for defense. The judgment highlighted the significance of accurate disclosure of income particulars and the consequences of failing to do so under the Income Tax Act.