2017 (9) TMI 102 - AT - Income Tax

Penalty u/s 271(1)(c) - inaccurate particulars of income or concealment of income - Held that - Assessing Officer while completing the assessment has not recorded the satisfaction and has not initiated the penalty proceedings. Similarly, at the time of imposing the penalty under section 271(1)(c) of the Act, the Assessing Officer has levied the penalty, but did not mention under which limb the penalty has been imposed whether it is on account of inaccurate particulars of income or concealment of income. Therefore, the entire penalty proceedings stand vitiated. - Decided in favour of assessee.

Summary

Issues involved:
- Appeal against penalty under section 271(1)(c) of the Income-tax Act
- Additional legal grounds raised by the assessee
- Validity of penalty imposition without specifying the grounds

Detailed Analysis:
1. The appeals by the assessee challenged the penalty imposed under section 271(1)(c) of the Income-tax Act for the assessment years 2006-07, 2002-03, and 2003-04. The grounds of appeal included contentions regarding excessive lease rentals, foreign travel expenditure, disallowed income-tax depreciation, rejection of bona fide claims, and penalties exceeding the tax sought to be evaded. The appeals were heard together due to identical issues.

2. The assessee filed additional legal grounds, citing the National Thermal Power Co. Ltd. case, arguing that the penalty notice and order were illegal, lacked jurisdiction, and were based on unspecific charges. The admission of these grounds was contested by the Departmental representative.

3. The Tribunal admitted the additional legal grounds raised by the assessee, emphasizing their purely legal nature and adherence to the National Thermal Power Co. Ltd. case law. The Tribunal proceeded to address these grounds first, considering them crucial to the case's outcome.

4. The case involved scrutiny assessment, transfer pricing issues, and subsequent penalty imposition under section 271(1)(c) of the Act. The Assessing Officer imposed a penalty of INR 60,00,000 following the Income-tax Appellate Tribunal's decision. The Commissioner of Income-tax (Appeals) partly allowed the appeal, confirming the penalty.

5. During the hearing, the assessee's counsel argued that the penalty proceedings were flawed as the satisfaction was not recorded during assessment, and the penalty imposition lacked specificity. Legal precedents, including decisions from the Karnataka High Court and the Supreme Court, were cited to support the cancellation of the penalty.

6. The Tribunal, after reviewing the assessment and penalty orders, found the penalty proceedings to be vitiated due to the absence of recorded satisfaction and unspecified grounds for penalty imposition. Citing relevant case law, including the SSA's Emerald Meadows case, the Tribunal concluded that the penalty was unsustainable in law and proceeded to delete the penalty in favor of the assessee.

7. Following the decision in the assessment year 2006-07 appeal, the Tribunal deleted the penalties in the appeals for the assessment years 2002-03 and 2003-04 as well. All three appeals filed by the assessee were allowed, overturning the penalties imposed under section 271(1)(c) of the Income-tax Act.

8. The Tribunal's final order, pronounced on June 28, 2017, reflected the allowance of all three appeals and the deletion of the disputed penalties, based on the legal deficiencies in the penalty imposition process.