2018 (3) TMI 1363 - HC - Income Tax

Penalty u/s 271(1)(c) - non strike off the two necessary ingredients for imposition of penalty namely; concealment of particulars of income or furnishing inaccurate particulars of income - non application of mind by AO - Held that - Concealment of particulars of income or furnishing inaccurate particulars of income in Section 271 (1)(c) of the Act carries different meaning. The satisfaction of the Assessing Officer at the time of initiation of penalty proceedings, must indicate which of the two i.e. concealment of particulars of income or furnishing inaccurate particulars of income applies to the facts of this case or in the alternative, it must indicate that both apply to the facts of the case. This is not having been done, prima facie, the impugned order dated 30th June, 2011 is not sustainable. This also would require consideration at the final hearing. - Decided in favour of assessee

Summary

Issues:
1. Application for expeditious hearing and stay of operation of the order by the Income Tax Appellate Tribunal.
2. Consideration of the appeal for admission.
3. Substantial question of law regarding the approval of penalty under Section 271(1)(c) of the Act.
4. Prima facie analysis of penalty imposition and non-application of mind in penalty proceedings.
5. Interpretation of concealment of particulars of income or furnishing inaccurate particulars of income.
6. Legal requirements for imposition of penalty under Section 271(1)(c) of the Act.
7. Stay of the impugned order for launching or supporting prosecution.

Detailed Analysis:

1. The appellant sought an expedited hearing and a stay on the Income Tax Appeal No.157 of 2017 regarding the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2006-07, which imposed a penalty under Section 271(1)(c) of the Act. The appellant's request was due to the respondent Revenue's intention to prosecute based on the Tribunal's order.

2. The High Court decided to consider the appeal for admission out of turn to evaluate the appellant's application for a stay on the impugned order. The appeal raised a substantial question of law concerning the Tribunal's approval of a penalty of ?4,00,000 under Section 271(1)(c) of the Act.

3. The Court found that the penalty imposition lacked a clear finding on whether it was for concealment of particulars of income or furnishing inaccurate particulars. The impugned order did not specify the particulars involved, indicating a potential issue with the penalty imposition based on an interpretation disagreement rather than intentional concealment.

4. The Court noted that the initiation of penalty proceedings seemed to lack proper consideration as it did not specify whether concealment or furnishing inaccurate particulars applied. Precedents suggested that these two aspects have distinct meanings, requiring clear identification during penalty proceedings for validity.

5. The Court referenced previous judgments to emphasize that the Assessing Officer's satisfaction during penalty initiation should clearly indicate which aspect applies to the case. The failure to do so could render the impugned order unsustainable, requiring further consideration during the final hearing.

6. While the appeal was admitted due to the substantial legal question raised, the Court determined that the Tribunal's order could not be the basis for prosecution support at that stage. Therefore, the respondent Revenue was restrained from relying on the impugned order for prosecution until the appeal's final disposal to ensure a fair and just process.