2019 (6) TMI 395 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - defective notice - non specifying the charge u/s. 271(1)(c) - concealment of income v/s furnishing inaccurate particulars of income - HELD THAT - A perusal of assessment order shows that penalty u/s. 271(1)(c) qua disallowance u/s. 14A has been initiated by mentioning both the limbs of section 271(1)(c). Thereafter, while passing penalty order dated 05-03-2015 the Assessing Officer again mentioned both the limbs of section 271(1)(c) 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. Expression concealment of income and furnishing inaccurate particulars of income cannot be used interchangeably. Concealment of income connotes where there is escapment of income from tax net by virtue of assessee concealing information/documents etc. or non-furnishing of information about income earned in the return of income during the relevant period. On the other hand expression furnishing inaccurate particulars of income signifies where the assessee has furnished particulars of income but the information/documents furnished are false/wrong/incorrect or erroneous. In the instant case, there was ambiguity and vagueness in the mind of Assessing Officer while recording satisfaction with respect to charge u/s. 271(1)(c) to be invoked. The same ambiguity persisted at the time of passing order levying penalty. 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 under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2008-09.

Analysis:

1. Ambiguity in specifying the charge under section 271(1)(c):
The appellant challenged the levy of penalty under section 271(1)(c) citing ambiguity in specifying the charge. The Assessing Officer initiated penalty proceedings mentioning both "furnishing inaccurate particulars of income" and "concealment of income." The Tribunal referred to the Karnataka High Court case of Commissioner of Income Tax Vs. Manjunatha Cotton and Ginning Factory, which emphasized that invoking both limbs of section 271(1)(c) simultaneously is not sustainable. The Tribunal held that the ambiguity in specifying the charge at the initiation and penalty stages indicated a lack of clarity in the Assessing Officer's decision-making process.

2. Differentiation between "concealment of income" and "furnishing inaccurate particulars of income":
The Tribunal referred to the Supreme Court case of T. Ashok Pai Vs. Commissioner of Income Tax, which clarified the distinction between "concealment of income" and "furnishing inaccurate particulars of income." It highlighted that concealment involves a deliberate act by the assessee, while furnishing inaccurate particulars signifies providing false, wrong, or incorrect information. The Tribunal emphasized that these terms cannot be used interchangeably, stressing the need for clear understanding and categorization by the Assessing Officer.

3. Legal requirements for penalty proceedings under section 271(1)(c):
Citing the Karnataka High Court case and other precedents, the Tribunal reiterated that the Assessing Officer must unambiguously determine whether the case involves concealment of income or furnishing inaccurate particulars. The Tribunal emphasized that invoking penalty provisions in an unclear manner, without specific categorization, fails to meet legal requirements. Consequently, the Tribunal set aside the impugned order and allowed the appeal of the assessee, emphasizing the necessity for precise and specific determination of the charge under section 271(1)(c) throughout the penalty proceedings.

In conclusion, the Tribunal's judgment in this case focuses on the importance of clarity and specificity in determining the charge under section 271(1)(c) of the Income Tax Act, highlighting the need for Assessing Officers to differentiate between "concealment of income" and "furnishing inaccurate particulars of income" to ensure the validity and legality of penalty proceedings.