2019 (5) TMI 1382 - AT - Income Tax

Penalty u/s 271(1)(c) - additional income declared by the assessee during the assessment proceedings after filing the return of income u/s 153A - HELD THAT - In this case the penalty has been initiated by the AO in the assessment order for both the charges i.e. concealment of income or for furnishing of inaccurate particulars of income. AO has initiated penalty under both the charges. Similarly, the penalty was imposed under both the charges in the penalty order dated 07.03.2014 passed u/s 271(1)(c). Though the notice issued u/s 274 r.w.s. 271(1)(c) is not before us so we are not able to comment on whether the assessee has mentioned both the charges or specific limb was pointed out but after perusal of the order of assessment passed u/s 143(3) r.w.s. 153A dated 31.12.2010 and the penalty order u/s 271(1)(c) dated 07.03.2014, we observe that the penalty was initiated for both the charges as well as imposed on both the charges which is not permissible under the Act as both these limbs are mutually exclusive. Under these circumstances, we are not in a position to sustain the order of CIT(A) confirming the penalty imposed u/s 271(1)(c) as the same is in violation of the ratio laid down by the Hon ble Bombay High Court in the case of Mrs. Piedade Perinchery 2017 (1) TMI 1458 - BOMBAY HIGH COURT Shri Samson Perinchery vs. CIT 2017 (1) TMI 1292 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Confirmation of penalty under section 271(1)(c) for additional income declared during assessment proceedings after filing the return under section 153A.

Analysis:
The three appeals were filed by the assessee against the order of the Commissioner of Income Tax (Appeals) concerning assessment years 2005-06, 2006-07, and 2007-08. The main issue raised was the confirmation of penalty by the CIT(A) under section 271(1)(c) of the Act for additional income of ?4,00,000 declared by the assessee during the assessment proceedings after filing the return under section 153A. The assessee initially filed a nil return of income and later declared additional income of ?4,00,000 during the assessment proceedings, attributing it to an entry found during a search. The penalty was imposed by the AO for concealing income or furnishing inaccurate particulars, which was upheld by the CIT(A).

During the proceedings, it was observed that the penalty was initiated and imposed for both charges of concealment of income and furnishing inaccurate particulars. However, it was noted that initiating and imposing penalties under both charges simultaneously is not permissible as they are mutually exclusive under the Act. Citing relevant legal precedents, including decisions by the Bombay High Court and the Supreme Court, the ITAT concluded that the penalty imposed under section 271(1)(c) was in violation of the law. The ITAT referred to specific cases to support its decision and directed the AO to delete the penalty, overturning the CIT(A)'s order.

In two additional appeals by the assessee for assessment years 2006-07 and 2007-08, the issue was the confirmation of penalties of ?1,83,600 and ?7,34,400, respectively. The ITAT, having already decided a similar issue in a previous appeal, applied the same reasoning and decision to these appeals. Consequently, the penalties in these two appeals were also set aside, and all three appeals by the assessee were allowed.

The ITAT's decision to set aside the penalties in all three appeals was based on the incorrect imposition of penalties for both charges of concealing income and furnishing inaccurate particulars simultaneously, which was deemed impermissible under the law. The ITAT's thorough analysis and reference to legal precedents supported its decision to direct the deletion of the penalties imposed by the AO, thereby ruling in favor of the assessee in all three appeals.