2017 (4) TMI 1029 - AT - Income Tax

Penalty under section 271(1)(c) - claim of loss on account of write off of fixed asset - Held that - Hon ble Karnataka High Court in CIT v/s Manjunatha Cotton & Ginning Factory, 2013 (7) TMI 620 - KARNATAKA HIGH COURT held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated. In the present case, neither the assessment order nor the notice issued under section 274 indicate the exact charge on the basis of which the Assessing Officer intends to impose penalty under section 271(1)(c). Therefore, viewed in the light of the principles laid down in the judicial precedents discussed herein above, we are of the opinion that the Assessing Officer having failed to record his satisfaction while initiating proceedings for imposition of penalty under section 271(1)(c) as to which limb of the provisions of section 271(1)(c) is attracted, the order imposing penalty is invalid. In view of the aforesaid, we hold that the imposition of penalty u/s 271(1)(c) in the present case is not justified. - Decided in favour of assessee.

Summary

Issues:
Penalty imposed under section 271(1)(c) for non-disclosure of income due to oversight.

Analysis:
The appeal was against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2011-12. The assessee, a company, had filed its return of income declaring a loss under the normal provisions. The Assessing Officer found a mismatch in interest received on fixed deposits as per books of account and Form-26AS. The assessee explained that the interest income was under-reported due to oversight. Additionally, an amount debited on account of fixed asset write-off was not added back to the total income. The Assessing Officer initiated penalty proceedings under section 271(1)(c) based on these discrepancies. The assessee objected, citing genuine oversight as the reason for non-disclosure. However, the penalty was confirmed by the Commissioner (Appeals).

The Authorized Representative argued that the non-disclosure was a genuine mistake due to oversight, supported by judicial precedents. The Assessing Officer did not specify the grounds for penalty imposition, which was deemed as a procedural flaw. The Departmental Representative contended that the penalty was justified as the income was deliberately not disclosed and was only discovered during scrutiny assessment.

The Tribunal found merit in the assessee's explanation, considering the oversight and lack of detection by auditors. It was held that the non-disclosure was a bonafide mistake, in line with judicial decisions. Moreover, the Assessing Officer's failure to specify the grounds for penalty imposition was considered a violation of natural justice principles. Citing relevant case laws, the Tribunal concluded that the penalty imposition was invalid due to procedural deficiencies. Consequently, the penalty under section 271(1)(c) was deemed unjustified and was deleted.

In conclusion, the Tribunal allowed the assessee's appeal, ruling in favor of deleting the penalty imposed under section 271(1)(c) for non-disclosure of income due to oversight.