2017 (3) TMI 76 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Held that - For arguments sake, even if it is assumed that assessee has concealed the income by claiming wrong deduction, it does not attract the provisions contained u/s 271(1)(c) in any manner whatsoever because when the assessment of the assessee is completed u/s 143(3), it is for the Revenue to assess the claim made by the assessee in accordance with the law and merely claiming wrong deductions and disallowance thereof by the AO does not amount to concealment of income. In other words, the Revenue has failed to prove that the assessee has concealed particulars of income or has furnished inaccurate particulars of such income so as to attract the provisions contained u/s 271(1)(c). When the assessee has claimed any deduction by not concealing anything and in case the deduction has been disallowed by the AO and assessment order has been confirmed by the CIT (A) it does not amount to concealment of income or furnishing of inaccurate particulars. - Decided in favour of assessee

Issues Involved:
1. Jurisdiction and validity of the penalty order.
2. Alleged concealment of income and furnishing of inaccurate particulars.
3. Basis for penalty imposition by the Assessing Officer (AO).
4. Specificity of charges in the show-cause notice.
5. Penalty on disallowed interest expenses.
6. Penalty on ROC fee addition.
7. Penalty on electricity expenses addition.
8. Calculation of alleged concealed income and penalty amount.

Detailed Analysis:

1. Jurisdiction and Validity of the Penalty Order:
The assessee challenged the penalty order dated 30.03.2014, arguing it was beyond jurisdiction, bad in law, and void ab initio. The Tribunal examined whether the Assessing Officer (AO) had the authority to pass the penalty order and found that the penalty proceedings were initiated based on disallowances made during the assessment under section 143(3) of the Income-tax Act, 1961.

2. Alleged Concealment of Income and Furnishing of Inaccurate Particulars:
The assessee contended that there was no concealment of income or furnishing of inaccurate particulars. The Tribunal noted that the AO must prove the existence of concealment or inaccurate particulars to levy a penalty under section 271(1)(c). The Tribunal emphasized that mere disallowance of expenses does not constitute concealment.

3. Basis for Penalty Imposition by the AO:
The AO imposed the penalty based on disallowances of interest expenses, a wrong claim of deduction under section 240A, and deduction claimed under section 35D. The Tribunal highlighted that the AO relied on these additions without proving deliberate concealment by the assessee.

4. Specificity of Charges in the Show-Cause Notice:
The Tribunal scrutinized the show-cause notice issued under section 274 of the Act and found it lacked specific charges, as it marked both "concealment of income" and "furnishing inaccurate particulars." Citing the Karnataka High Court's judgment in CIT vs. Manjunatha Cotton and Ginning Factory, the Tribunal held that the notice must clearly state the grounds for penalty, and a generic notice violates principles of natural justice.

5. Penalty on Disallowed Interest Expenses:
The Tribunal considered the assessee's argument that the building was complete and ready for letting out, and the interest expense was a matter of timing rather than concealment. The Tribunal found that both views (building complete or under construction) were plausible, and hence, penalty was not exigible.

6. Penalty on ROC Fee Addition:
The Tribunal noted that the ROC fee for increasing authorized share capital was disclosed in the audited accounts. The Tribunal held that since the information was available to the AO, it did not constitute concealment or furnishing inaccurate particulars.

7. Penalty on Electricity Expenses Addition:
The Tribunal observed that the electricity expenses were claimed in the year under appeal, while the corresponding revenue was booked in the next year. The Tribunal concluded that this was a matter of timing and did not amount to concealment or furnishing inaccurate particulars.

8. Calculation of Alleged Concealed Income and Penalty Amount:
The assessee argued that the calculation of the alleged concealed income and the penalty amount was incorrect. The Tribunal did not specifically address this issue but focused on the broader principle that the penalty was not justified due to lack of clear charges and proof of concealment.

Conclusion:
The Tribunal concluded that the penalty under section 271(1)(c) was not sustainable due to the lack of specific charges in the show-cause notice and the absence of proof of concealment or furnishing inaccurate particulars. The Tribunal deleted the penalty and allowed the appeal filed by the assessee. The order was pronounced in open court on February 10, 2017.

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