2018 (11) TMI 129 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - Held that - AO is required to specify which limb of Section 271 (1)(c) of the Act, the penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. From the perusal of the notice issued u/s 274 r.w.s. 271 of the Act, it is clear that the Assessing Officer has not specified as to under which limb of the section the penalty was imposable. The notice, in fact, is in the standard pro forma wherein the irrelevant clauses have not been struck off. This indicates non-application of mind on the part of the Assessing Officer while issuing the penalty notice. Thus, in the circumstances and facts of the case, the penalty proceedings initiated by the Assessing Officer are bad in law and deserve to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reassessment proceedings for AY 2004-05.
2. Applicability of Section 44 of the Income Tax Act for AYs 2005-06 to 2010-11.
3. Imposition of penalty under Section 271(1)(c) for AY 2007-08.

Detailed Analysis:

1. Validity of Reassessment Proceedings for AY 2004-05:
The department's appeal (ITA No. 3509/Del/2013) against the order dated 15.03.2013 by the Ld. CIT (A)-I, New Delhi, was dismissed. The reassessment proceedings initiated under Section 148 were annulled by the Ld. CIT (A) due to lack of substantial material other than the revenue audit objection. The Ld. CIT (A) found that the reassessment was based on a change of opinion, which is not a valid ground for reopening settled assessments, especially after four years. The department did not challenge the annulment of reassessment proceedings, making their appeal on the merits of the case academic. Consequently, the appeal was dismissed as infructuous.

2. Applicability of Section 44 of the Income Tax Act for AYs 2005-06 to 2010-11:
For AYs 2005-06 to 2010-11, the department challenged the directions of the Ld. CIT (A) to compute the assessee's income under Section 44 of the Act. The assessee, engaged in the life insurance business, had initially filed returns under the incorrect provisions of Sections 28 to 43B but later submitted revised computations under Section 44 during appellate proceedings. The ITAT upheld the Ld. CIT (A)'s directions, emphasizing that Section 44 overrides other provisions for computing profits and gains from life insurance business. The appeals (ITA Nos. 6243/Del/2013, 6244/Del/2013, 5624/Del/2011, 1347/Del/2013, 6245/Del/2013, and 6246/Del/2013) were dismissed, affirming the necessity to assess income as per Section 44.

3. Imposition of Penalty under Section 271(1)(c) for AY 2007-08:
The assessee's appeal (ITA No. 3480/Del/2012) challenged the penalty of ?6,13,947/- imposed under Section 271(1)(c). The ITAT found that the notice issued under Section 274 did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. Citing the Karnataka High Court's decision in CIT vs. Manjunatha Cotton & Ginning Factory and subsequent affirmation by the Supreme Court, the ITAT held that non-specification of the charge renders the penalty proceedings invalid. The penalty was deleted, and the appeal was allowed.

Conclusion:
All seven appeals by the department were dismissed, and the sole appeal by the assessee was allowed. The ITAT emphasized adherence to specific provisions for life insurance business income computation and highlighted procedural lapses in penalty imposition.