2017 (12) TMI 1397 - AT - Income Tax

Penalty levied u/s.271(1)(c) - defective notice - Held that - AO has not bothered to specify the limb or stuck off an inappropriate limb of the provisions of section 271(1)(c) of the Act. It shows that the AO has not applied his mind to the fact for which reason of the default, the penalty notices were issued. We find the penalty order of the AO falls short of legal requirement on the issue under discussion. Initiation of penalty proceedings in this case done in a general sense and the levy of penalty is done for both the limbs and such orders are bad in law. Usage of expressions like or and and confirm the ambiguity in the mind of AO. With such expressions the penalty is not sustainable. In view of the above discussion, we uphold the order of the CIT(A) deleting the penalty levied by the AO for both the assessment years. Accordingly, the grounds raised by the Revenue for A.Yrs. 2010-11 and 2011-12 are dismissed.

Summary

Issues:
Appeals against deletion of penalties u/s.271(1)(c) for A.Yrs. 2010-11 & 2011-12.

Analysis:
1. Brief Facts:
The appellant, a domestic company, disclosed additional income belatedly in revised returns for both assessment years. The AO initiated penalty proceedings u/s.271(1)(c) for concealment of income, levying penalties for both years. However, CIT(A) deleted the penalties relying on judicial precedents.

2. AO's Actions:
The AO initiated penalties without specifying the limb under which the penalty was imposed, indicating a lack of legal compliance. The AO's penalty order referred to both limbs of section 271(1)(c), showing ambiguity in decision-making.

3. Appellant's Arguments:
The appellant argued that the AO's reasoning lacked legal sufficiency and did not meet the requirement of law for penalty initiation. Citing relevant case laws, the appellant contended that penalties should not be sustained without clear satisfaction by the AO.

4. Judicial Precedents:
The Tribunal referred to judgments emphasizing the necessity of AO's clear satisfaction before imposing penalties. The usage of ambiguous terms like "or" and "and" in penalty orders indicated the AO's lack of clarity, rendering the penalties unsustainable.

5. Decision:
The Tribunal upheld CIT(A)'s decision to delete the penalties, emphasizing the importance of AO's judicial discretion and legal compliance in penalty imposition. Relying on precedents and considering the AO's ambiguous actions, the Tribunal dismissed the Revenue's appeals for both assessment years.

6. Conclusion:
The Tribunal's decision highlighted the significance of AO's clear reasoning and legal compliance in penalty proceedings. By emphasizing judicial discretion and legal requirements, the Tribunal maintained the deletion of penalties, ensuring fair application of tax laws.