2019 (2) TMI 1578 - AT - Income Tax

Penalty levied u/s 271(1)(c) - non recording of proper satisfaction - HELD THAT - The assessee s case is clearly covered under Explanation 1 to sub-section (1) of section 271 and AO held the assessee to have furnished inaccurate particulars of its income. In view of non recording of proper satisfaction by the Assessing Officer while initiating penalty proceedings u/s 271(1)(c) of the Act, wherein penalty was initiated for both the limbs i.e. concealment of income and furnishing of inaccurate particulars of income and thereafter also while levying penalty for concealing the income and furnishing inaccurate particulars of income; we find that in the absence of proper satisfaction being recorded and show cause being given to the assessee as to non fulfillment of either of the limbs of section, there is no merit in levy of aforesaid penalty under section 271(1)(c) of the Act. We find support from the ratio laid down in CIT Vs. Shri Samson Perinchery (2017 (1) TMI 1292 - BOMBAY HIGH COURT), wherein it was held that where there is no proper satisfaction for initiating penalty proceedings and in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty. Accordingly, we delete the penalty levied under section 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
1. Jurisdictional issue regarding penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961.
2. Levy of penalty for concealment of income and furnishing inaccurate particulars of income.

Detailed Analysis:
Issue 1: The jurisdictional issue raised in the present appeals pertains to the initiation of penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961. The additional ground of appeal filed by the assessee challenged the Assessing Officer's initiation of penalty without specifying the exact limb of section 271(1)(c) and for levying penalty based on inaccurate particulars and concealment of income under explanation 1 to the section. The Tribunal admitted this issue for adjudication, considering it to be jurisdictional in nature involving a question of law without requiring further verification of facts.

Issue 2: The main issue in the appeals concerns the levy of penalty under section 271(1)(c) of the Act. The Assessing Officer had initiated penalty proceedings based on the belief that the assessee had concealed income by filing inaccurate returns regarding purchases. However, the Tribunal found that there was a lack of proper satisfaction recorded by the Assessing Officer while initiating the penalty proceedings. The Tribunal referenced a case law from the Hon’ble Bombay High Court, CIT Vs. Shri Samson Perinchery, which established that without proper satisfaction and a show cause notice to the assessee, the penalty levy lacks merit. Consequently, the Tribunal ruled in favor of the assessee and deleted the penalties imposed under section 271(1)(c) in all the appeals, allowing the additional ground of appeal raised by the assessee.

In conclusion, the Tribunal allowed all the appeals of the assessee, emphasizing the importance of proper satisfaction and show cause notice in penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961. The judgment highlighted the necessity for clear procedural adherence and justified reasoning in penalty assessments to ensure fairness and legality in tax matters.