2019 (3) TMI 894 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - Addition of LTCG - assessee had adopted indexed cost of acquisition of land as on 01-04-1981 without any basis and had declared Long Term Capital Loss -deliberate Act on the part of assessee to suppress the Long Term Capital Gains and has thereby caused losses to the Revenue - Assessing Officer while recording satisfaction has invoked both the charges of section 271(1)(c) - at the time of levy of penalty, the Assessing Officer stick to only one charge i.e. concealment of income - HELD THAT - The Hon ble Supreme Court of India in the case of T. Ashok Pai Vs. Commissioner of Income Tax 2007 (5) TMI 199 - SUPREME COURT has held, Concealment of income and furnishing of inaccurate particulars carry different connotations. Concealment refers to deliberate act on the part of the assessee. Expression concealment of income and furnishing inaccurate particulars of income cannot be used interchangeably In the instant case, we are of considered opinion that there was ambiguity and vagueness in the mind of Assessing Officer while recording satisfaction with respect to charge u/s. 271(1)(c) for levy of penalty. Though at the time of levy of penalty, the Assessing Officer stick to only one charge i.e. concealment of income. The Assessing Officer has to be specific and categoric in mentioning the charge u/s. 271(1)(c) at the time of recording satisfaction as well as at the time of levy of penalty. Where penalty provisions have been invoked in indistinct manner, penalty proceedings would fail the test of legal requirements. Accordingly, the impugned order is set aside and the appeal of assessee is allowed.

Summary

Issues:
Levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 based on concealment of income and inaccurate particulars of income.

Analysis:
1. The appeal was against the order confirming the penalty under section 271(1)(c) for the assessment year 2006-07. The notice of appeal was sent to the assessee, but no one appeared on behalf of the assessee during the proceedings.

2. The assessee explained the source of payment for the purchase of flats/shops by utilizing the sale consideration received from the sale of three parcels of land. The Assessing Officer disagreed with the cost of acquisition adopted by the assessee and referred the matter to the DVO for valuation. The Long Term Capital Gain was reworked, leading to the initiation of penalty proceedings under section 271(1)(c) on the addition made.

3. The Commissioner of Income Tax (Appeals) dismissed the contentions of the assessee and upheld the penalty. The Department argued that the assessee deliberately suppressed Long Term Capital Gains, causing losses to the Revenue.

4. The Assessing Officer initiated penalty proceedings for concealing income by filing inaccurate particulars. The order levying penalty mentioned concealment of income without reasonable cause, leading to the imposition of a penalty.

5. The Assessing Officer invoked both charges of section 271(1)(c) for the penalty. The Hon'ble Supreme Court clarified that "concealment of income" and "furnishing inaccurate particulars of income" have distinct meanings. The Karnataka High Court emphasized the need for clarity in identifying the charge for levying a penalty.

6. The Tribunal found ambiguity in the Assessing Officer's satisfaction regarding the charge under section 271(1)(c) for penalty imposition. While the charge of concealment of income was mentioned during the penalty levy, the initial satisfaction lacked specificity. Due to this lack of clarity, the penalty proceedings did not meet legal requirements, leading to the allowance of the assessee's appeal.

7. Consequently, the Tribunal set aside the impugned order and allowed the appeal of the assessee, emphasizing the importance of clear identification of the charge under section 271(1)(c) for penalty purposes.