2017 (11) TMI 718 - AT - Income Tax

Penalty under section 271(1)(c) - charge for which penalty was initiated - Held that - We are of the view that the AO has initiated penalty proceedings for furnishing of inaccurate particulars of income, whereas, the penalty was levied for both the charges is as evident from the penalty order. AO has mixed up both the limbs whereas as per settled legal pronouncements of superior court, the two limbs of Section 271(1)(c) viz. furnishing of inaccurate particulars of income and concealment of income carry different meaning / connotations. Therefore, Ld. AO himself was not sure about the charge for which penalty was initiated and finally levied on the assessee. Hence, the issue, as rightly pointed out by Ld. AR, stood covered in assessee s favor by Hon ble Jurisdictional High Court in the case of Samson Perincherry (2017 (1) TMI 1292 - BOMBAY HIGH COURT). Respectfully following the Hon ble High Court decision, we delete the penalty and reverse the order of the lower authorities - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdictional issue regarding the validity of the penalty order under section 271(1)(c) of the Income Tax Act, 1961.
2. Merits of the penalty levied under section 271(1)(c) for concealment of income or furnishing inaccurate particulars of income.

Issue-wise Detailed Analysis:

1. Jurisdictional Issue:
The primary contention raised by the assessee was that the penalty order under section 271(1)(c) was invalid as the notice issued under section 274 read with section 271(1)(c) did not clarify whether the penalty was initiated for concealment of particulars of income or for furnishing inaccurate particulars thereof. The assessee argued that the Assessing Officer (AO) was not clear about the charge against the assessee, which vitiated the penalty order. The assessee relied on the decision of the Hon’ble Bombay High Court in the case of CIT vs. Samson Perinchery, which held that the AO must be clear about the limb under which penalty is being levied.

The Tribunal agreed with the assessee, noting that the AO had mixed up both limbs in the penalty order, which indicated non-application of mind. The Tribunal found that the issue was covered in favor of the assessee by the decision of the Hon’ble Bombay High Court in Samson Perinchery, which emphasized that concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the AO should be clear about which limb is being invoked. Consequently, the Tribunal deleted the penalty on jurisdictional grounds.

2. Merits of the Penalty:
On the merits, the Tribunal noted that during the search and seizure action, the Director of the assessee company had offered undisclosed income in the statement recorded under section 132(4). However, this statement was later retracted. The AO, during the assessment, rejected the retraction and made additions towards bogus purchases, leading to the initiation of penalty proceedings for furnishing inaccurate particulars of income.

The Tribunal observed that the AO, in the penalty order, discussed both limbs of section 271(1)(c) but ultimately levied the penalty for furnishing inaccurate particulars of income. The Tribunal found that the AO had not clearly specified the charge, leading to ambiguity. The Tribunal reiterated that as per settled legal pronouncements, the two limbs of section 271(1)(c) carry different meanings, and the AO must be clear about the charge for which penalty is initiated and levied.

The Tribunal concluded that the AO’s lack of clarity and mixing up of the two limbs vitiated the penalty order. Therefore, the penalty was deleted, and the order of the lower authorities was reversed. The Tribunal did not delve into the merits further, as the jurisdictional issue itself was sufficient to decide the appeal in favor of the assessee.

Conclusion:
The appeal of the assessee was allowed on jurisdictional grounds, and the penalty under section 271(1)(c) was deleted. The Tribunal emphasized the importance of clarity in the AO’s satisfaction regarding the specific charge under section 271(1)(c) and followed the decision of the Hon’ble Bombay High Court in Samson Perinchery.