2019 (3) TMI 1195 - AT - Income Tax

Penalty u/s. 271(l)(c) - disallowance representing of interest expenditure considered as attributable on the outstanding balance due from Chitralekha Printers and Publishers Pvt. Ltd., in assessment order passed u/s. 143(3) - difference in grounds on penalty initiated and finally imposed - HELD THAT - Although the penalty was initiated for furnishing of inaccurate particulars of income whereas the penalty has finally been levied for concealment of income. Even, in the show-cause notice, AO has failed to mention the specific charge against the assessee. These two expressions i.e. furnishing of inaccurate particulars and concealment of income, as per judicial pronouncements of higher judicial authorities, carry different connotations and non-framing of specific charge against the assessee vitiates the penalty proceedings. See Manjunath Cotton & Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) carry different meanings/connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice. - decided in favour of assessee.

Issues:
1. Appeal against penalty levied under section 271(1)(c) of the Income Tax Act for disallowance of interest expenditure.
2. Additional grounds raised contesting the legality of penalty proceedings.
3. Admission of additional grounds by the Appellate Tribunal.
4. Validity of penalty order due to lack of specific charge against the assessee.
5. Distinction between furnishing inaccurate particulars of income and concealment of income.
6. Application of judicial precedents in determining the legality of penalty proceedings.
7. Reliance on the decision of Hon'ble Apex Court in Jain Brothers Vs. Union of India [1970 77 ITR 107].

Analysis:

1. The appeal challenges the penalty imposed under section 271(1)(c) of the Income Tax Act for disallowance of interest expenditure. The assessee contested the penalty on legal grounds, arguing that the penalty proceedings were initiated without a specific charge against them. The Appellate Tribunal admitted additional grounds raised by the assessee, citing judicial pronouncements to support the admission of legal issues.

2. The penalty order was based on the disallowance of interest expenditure in the quantum assessment. The assessee raised objections on legal grounds and merits but was unsuccessful before the first appellate authority. The Appellate Tribunal took up the legal issues first as they questioned the validity of the penalty order passed by the Assessing Officer.

3. The assessee argued that the penalty proceedings lacked a specific charge against them, citing judicial precedents to support their claim. The Departmental Representative contended that the assessee was aware of the charges, and no prejudice was caused during the penalty proceedings. The Tribunal found that the penalty was initiated for inaccurate particulars but levied for concealment of income, highlighting the discrepancy in the charge against the assessee.

4. The Tribunal referred to the decision of the Hon'ble Bombay High Court in CIT Vs. Samson Perinchery, emphasizing the importance of clarity in the initiation of penalty proceedings. The Tribunal concluded that the non-framing of a specific charge against the assessee vitiated the penalty proceedings, in line with judicial precedents emphasizing the distinction between furnishing inaccurate particulars and concealment of income.

5. The Tribunal dismissed the Revenue's argument that there was no difference between furnishing inaccurate particulars and concealment of income, citing the Supreme Court's observation that these carry different meanings. The Tribunal upheld the decision in favor of the assessee, following the Karnataka High Court's ruling in a similar case. The Tribunal found no reason to deviate from the established legal precedent.

6. The Tribunal addressed the Revenue's reliance on the decision of the Hon'ble Apex Court in Jain Brothers Vs. Union of India [1970 77 ITR 107], noting the contextual difference of the case from the present matter. The Tribunal, in line with the binding judicial precedent, deleted the penalty on legal grounds, rendering the examination of the penalty on merits unnecessary.

7. In conclusion, the Appellate Tribunal allowed the appeal, pronouncing the order on 19th March 2019, based on the deletion of the penalty on legal grounds following established judicial precedents.

← Previous Next →