2019 (6) TMI 1215 - AT - Income Tax

Penalty u/s 271(1)(c) - wrong claim of TDS which not belong to the assessee but appeared in the form No.26AS - non specific charge - defective notice - HELD THAT - As during the assessment proceedings the AO rejected the claim of the assessee for the TDS and there was no addition made to the income of the assessee of any kind whatsoever qua this TDS claim. In our view the penalty under section 271(1)(c) can only be initiated and levied if there is a concealment of income or furnishing of inaccurate particulars of income on the part of the assessee. However in this particular case it was a wrong claim of TDS and thus the provisions of section 271(1)(c) do not apply to the present case. Even for the purpose of levying of penalty the mechanism provided in the section itself provides for the calculation of penalty which is 100% to 300% of the tax sought to be evaded. Even on legal issue the assessee has got a very strong case as the penalty has been initiated on both the charges. The penalty notices u/s 271(1)(c) dated 09.03.2016 and 22.08.2016 were issued in a mechanical manner without mentioning or stating the specific charge on which the penalty was proposed to be levied without any application of mind. Similarly the order of imposing penalty was passed by the AO on both the charges As decided in SHRI SAMSON PERINCHERY 2017 (1) TMI 1292 - BOMBAY HIGH COURT penalty can be levied where the specific charge was not mentioned in the notice issued u/s 274 read with section 271(1)(c) as the assessee is not confronted and given an opportunity to respond to the charge on which the penalty was levied and the penalty imposed was held to be invalid. - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Act for wrong claim of TDS without offering corresponding income to tax.

Analysis:
The appeal was filed against the penalty imposed by the AO under section 271(1)(c) of the Act for a wrong claim of TDS without offering the corresponding income to tax. The AO observed that the TDS claimed by the assessee did not belong to them, and since the corresponding income was not offered, the claim was rejected, leading to penalty proceedings. The penalty was levied on the grounds of furnishing inaccurate particulars of income and concealment of income. The assessee contended that the penalty was unjustified as there was no concealment or inaccurate particulars, but rather a wrong claim of TDS. The only addition in the assessment order was a disallowance under section 14A, and no addition was made concerning the TDS claim.

In the appellate proceedings, the CIT(A) dismissed the appeal based on merits and the legal issue of not specifying the charge in the penalty notice. The CIT(A) referred to a relevant case law and emphasized that the assessee should have known about the lack of corresponding income to the TDS credit claimed. The CIT(A) also noted that the assessee participated in the penalty proceedings, thus receiving a fair opportunity to respond to the charges, falling under the provisions of section 292B of the Act.

Upon review, the Tribunal observed that the penalty was imposed for a wrong claim of TDS without offering the corresponding income to tax. The TDS in question did not belong to the assessee and was claimed based on Form No.26AS. The Tribunal highlighted that for penalty under section 271(1)(c) to apply, there must be concealment or furnishing of inaccurate particulars of income, which was not the case here. The penalty calculation mechanism requires tax evasion for its imposition, which was absent in this scenario. Additionally, the penalty notices and order were issued mechanically without specifying the charges, contrary to legal requirements.

Relying on relevant case law, the Tribunal overturned the CIT(A)'s decision and directed the AO to delete the penalty, stating that no penalty was exigible on both technical and merit grounds. The appeal of the assessee was allowed, emphasizing the lack of concealment or inaccurate particulars in the TDS claim issue.

In conclusion, the Tribunal found that the penalty was unjustified as there was no concealment or furnishing of inaccurate particulars, but rather a wrong claim of TDS without corresponding income offered to tax. The decision emphasized the importance of adhering to legal procedures in penalty imposition and highlighted the necessity of tax evasion for penalty under section 271(1)(c) to be applicable.