2017 (9) TMI 1396 - AT - Income Tax

Penalty u/s 271(1)(C) - Addition of ₹ 2.20 crores made/offered during the assessment proceedings - exact charge on which penalty imposed - proof of inaccurate particulars and concealment of income - Held that - A perusal of the quantum assessment order reveals that the penalty has been initiated for furnishing of inaccurate particulars of income and concealment of income by invoking both Section 271(1)(c) and Section 271 AAA which altogether operate in different circumstances. Moreover, furnishing of inaccurate particulars and concealment of income as per settled legal propositions, are different connotations and carry different meaning and two separate limbs. The same also becomes clear from the language of show-cause notice which states that the assessee have concealed the particulars of income or furnished inaccurate particulars of income. Finally, the penalty has been levied for concealment u/s 271(1)(c) which shows confusion / doubt prevailing in the mind of Ld. AO. Undisputedly, the AO was required to specify the exact charge for which the assessee was being penalized which he has failed to do so and the same has resulted into taking away assessee s valuable right of contesting the same and thereby violates the principles of natural justice. We are of the considered opinion that the penalty proceedings stood vitiated for want of satisfaction and in violation of principle of natural justice and therefore, liable to be quashed. We held so which results into dismissal of revenue s appeal.

Summary

Issues:
Appeal against deletion of penalty u/s 271(1)(C) of the Income Tax Act, 1961 for Assessment Year 2008-09.

Analysis:

1. The appeal by the Revenue challenged the deletion of penalty u/s 271(1)(C) for the AY 2008-09. The assessee, a resident firm engaged in construction, was assessed following a search action in a group of cases. The issue revolved around the addition of ?2.20 crores made during assessment proceedings. The AO initiated penalty proceedings, leading to a penalty of ?74,77,800. The CIT(A) deleted the penalty, citing that no specific concealment or suppression of receipts was detected, and the addition was based on estimates. The CIT(A) concluded that it was not a fit case for penalty under section 271(1)(C), which was supported by legal precedents.

2. The Departmental representative argued that the penalty was justified due to significant variations in sale prices, indicating suppression of income. The AR challenged the penalty proceedings' validity, highlighting discrepancies in the show-cause notice and the grounds for penalty initiation. The Tribunal noted that the AO's observations showed inconsistency in the grounds for penalty, as both concealment and furnishing inaccurate particulars were invoked. This lack of clarity violated the principles of natural justice and deprived the assessee of the opportunity to contest effectively.

3. Referring to legal precedents, including the Supreme Court's decision in Dilip N. Shroff vs. JCIT, the Tribunal emphasized the distinction between concealment and inaccurate particulars. The failure to specify the exact charge for penalty and the ambiguity in the show-cause notice rendered the penalty proceedings invalid. The Tribunal differentiated this case from precedent cited by the Revenue, where clarity existed in penalty initiation. Consequently, the Tribunal quashed the penalty proceedings on legal grounds, leading to the dismissal of the Revenue's appeal.

4. Given the quashing of the penalty on legal grounds, the Tribunal found no need to further address the matter on its merits. The appeal was dismissed, and the order was pronounced on June 27, 2017.

This detailed analysis showcases the legal intricacies and precedents considered in the judgment, highlighting the procedural and substantive issues addressed by the Tribunal.