2018 (8) TMI 971 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Assessment u/s 153A - revised return - Assessee contended that, when the assessee filed the return pursuant to notice u/s 153A of the Act and validly revised it, such return takes the place and deemed to have been filed the return u/s 139(1) of the Act and since the assessment is complete accepting the revised return, no penalty could be levied. - Held that - the return of income filed pursuant to the notice u/s 153A takes the place of the return filed u/s 139(1) which was validly revised by the assessee even before any defect was pointed out by the learned AO. - Admittedly, in this matter both the returned income and the assessed income are nil. On this ground also, we cannot sustain the penalty order. No penalty - Decided in favor of assessee

Summary

Issues:
Assessment of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for concealment of income by filing inaccurate particulars.

Detailed Analysis:

1. Background: The assessee initially declared a significant loss in the return of income, which was later revised to declare nil income following search and seizure operations. The Assessing Officer (AO) levied a penalty under Section 271(1)(c) for alleged concealment of income by filing inaccurate particulars.

2. Contentions: The assessee argued that the penalty notice did not specify the grounds for penalty, and the assessment was completed based on the revised return declaring nil income. The assessee also contended that no incriminating documents were found during the search, and therefore, no penalty should be levied.

3. Legal Precedents: The Tribunal referred to the case law to emphasize the importance of specifying the grounds for penalty in the notice issued under Section 271(1)(c). The High Court decisions in CIT vs Manjunatha Cotton & Ginning Factory and CIT vs SSA's Emerald Meadows highlighted the necessity of clarity in the penalty proceedings.

4. Decision: The Tribunal observed that the penalty notice did not specify whether it was for concealment of income or furnishing inaccurate particulars, leading to a jurisdictional defect. Additionally, since the revised return was accepted and assessed at nil income, the Tribunal held that there was no basis for imposing a penalty. The Tribunal, therefore, quashed the penalty proceedings and allowed the appeals, deleting the penalties for the relevant assessment years.

5. Conclusion: The judgment underscores the significance of procedural compliance in penalty proceedings, emphasizing the need for clarity in specifying the grounds for penalty. It also reaffirms that when the revised return is accepted and assessed at nil income, there is no justification for imposing a penalty. The decision provides a comprehensive analysis of the legal principles governing penalty assessment under Section 271(1)(c) of the Income Tax Act, ensuring fairness and adherence to procedural requirements.