2017 (4) TMI 407 - AT - Income Tax

Penalty u/s 271(1)(c) - defective SCN - Held that - The penalty has been initiated on one limb but finally imposed for another limb. Further, the show-cause notice u/s 274 read with section 271 issued to the assessee did not specify the limb for which the penalty proceedings were being initiated against the assessee which took away a valuable right of the assessee and therefore, vitiates the penalty proceedings. Thus we hold the penalty proceedings to be bad in law and therefore, quash the same. See CIT Vs SSA s Emerald Meadows 2016 (8) TMI 1145 - SUPREME COURT . - Decided in favour of assessee

Summary

Issues:
Confirmation of penalty u/s 271(1)(c) for multiple Assessment Years based on search & seizure action. Applicability of Explanation 5A of Section 271(1)(c) in penalty proceedings. Discrepancy between the grounds for initiating penalty and the grounds for confirming penalty. Validity of penalty proceedings due to lack of specificity in the show-cause notice. Contesting penalties for various Assessment Years by two assessees.

Analysis:

1. The judgment by the Appellate Tribunal ITAT Mumbai dealt with the confirmation of penalties under section 271(1)(c) for multiple Assessment Years following a search & seizure action. The appeals were against orders of the Principal Commissioner of Income Tax confirming the penalties. The Tribunal consolidated all appeals for convenience. The first case involved an assessee challenging a penalty for Assessment Year 2006-2007, imposed for furnishing inaccurate particulars of income. The penalty was confirmed by the CIT(A), citing Explanation 5A of Section 271(1)(c).

2. The assessee argued that the penalty should be deleted as the returned income under section 153A was accepted without further additions, and the difference in income was due to interest on bank deposits, not intentional evasion. The penalty was initiated for concealment but imposed for furnishing inaccurate particulars, violating natural justice principles. The Tribunal agreed that the penalty proceedings were flawed due to lack of specificity in the show-cause notice, following legal precedents, and quashed the penalty.

3. The Tribunal further addressed penalties imposed on the same grounds for other Assessment Years, deleting them based on the same reasoning. Another set of appeals involved penalties imposed on the wife of the first assessee for various Assessment Years, following a similar pattern of flawed penalty proceedings. The Tribunal deleted these penalties as well, maintaining consistency in its decisions.

4. In conclusion, the Tribunal allowed all appeals by both assessees, emphasizing the importance of adherence to legal principles and precedents in penalty proceedings. The judgment highlighted the significance of clarity in show-cause notices and the need for penalties to be imposed in accordance with established legal standards.

The judgment demonstrates the Tribunal's commitment to upholding fairness and legality in tax penalty cases, ensuring that penalties are imposed based on clear grounds and in compliance with statutory provisions and judicial precedents.