2019 (3) TMI 218 - AT - Income Tax

Penalty u/s 271(1)(c) - undisclosed income according to the statement of the assessee u/s 132(4) - income for specified year - Right course of action is to invoke sec. 271AAA - HELD THAT - Where the case of the AO is that income pertains to specified year as categorically observed in the assessment year as well as in the penalty order, the right course of action available to the AO is to invoke sec. 271AAA of the Act for the purposes of imposition of penalty on undisclosed income pertaining to specified year. The penalty has been invoked in the present case u/s 271(1)(c) of the Act which is not sync with the scheme of the Act. Explanation 5A to section 271(1)(c) enables imposition of penalty for a period other than specified previous year contemplated under s. 271AAA. Therefore the satisfaction of the AO qua a wrong section for the purposes of penalty of strict nature is clearly no satisfaction in the eyes of law. The whole action of the AO carried under s. 271(1)(c) is thus vitiated and a nullity in law. In the backdrop of these observations we do not consider it expedient to examine any other aspect of the matter. The entire proceedings is bad in law at the threshold. The penalty imposed under s. 271(1)(c) of the Act is thus no sustainable in law. - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act concerning assessment year 2009-10.

Analysis:
The appeal was filed by the assessee against the penalty of ?24,08,800 confirmed by the CIT(A) under section 271(1)(c) of the Act. The search conducted under section 132 of the Income Tax Act led to the initiation of proceedings under section 153A. The assessee declared total income at ?1,60,08,210, including a disclosure of ?61,94,647 made during the search. The AO imposed a penalty based on the additional income declared by the assessee. The CIT(A) upheld the penalty. The assessee contended that no incriminating material was found to support the alleged bogus transaction except for oral evidence. The AO accepted the income disclosed by the assessee without any additions. The AR argued that no concealment of income could be inferred when the return filed under section 153A was accepted without variations. The AR also highlighted the contradictory stand of the AO regarding the specified year, arguing that penalty under section 271AAA should have been invoked instead of section 271(1)(c).

The DR supported the lower authorities' actions and cited a judgment of the Calcutta High Court. The tribunal observed that the AO's invocation of penalty under section 271(1)(c) was not in line with the statutory provisions. The undisclosed income related to a specified year, and the penalty should have been imposed under section 271AAA. The tribunal found the AO's actions under section 271(1)(c) to be legally flawed and directed the deletion of the penalty. The tribunal held that the penalty imposed was not sustainable in law and allowed the assessee's appeal.

In conclusion, the tribunal found that the penalty imposed under section 271(1)(c) was not legally valid due to the incorrect invocation of the penalty provision. The tribunal directed the AO to delete the penalty amount levied under section 271(1)(c) of the Act.