2019 (7) TMI 181 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - disallowance u/s 40(a) (ia) - whether no specific charges as relates to concealment of income or furnishing of inaccurate particulars of income? - HELD THAT - There was no concealment on the part of the assessee. This was a simple case of disallowance u/s 40(a) (ia) as the assessee was under the belief that TDS is not liable to be deducted on payment of NBFCs. Thus the authorities cited by the AR are applicable in the present case. In respect of interest expenses the same was not concealed by the assessee before the AO. Thus there is no concealment. Section 271(1)(c) was not correctly invoked by the AO. CIT(A) also overlooked the actual intention of the penalty proceedings which clearly set out that when there is inaccurate particulars or concealment on part of the assessee then the same should be proceeded. But in the present case the assessee has disclosed all the factual aspects before the AO which cannot be stated that there was concealment of particulars of income or the assessee furnished inaccurate particulars of income. Assessee has also filed all the details during the regular assessment proceedings. It can be seen that the AO was not sure under which provisions of Section 271 the assessee is liable for penalty - merely because the assessee company did not challenge the addition before the CIT(A) is no ground to levy penalty against the assessee company. See M/S. NETAMBIT VALUE FIRST SERVICES PVT. LTD. VERSUS THE DCIT CIRCLE-13 (1) NEW DELHI 2018 (3) TMI 36 - ITAT DELHI - Decided in favour of assessee.

Summary

Issues Involved:
Penalty under section 271(1)(c) of the Income Tax Act - Validity of notice specifying charges - Disallowance under section 40(a)(ia) - Disallowance of interest expenses - Concealment of income or furnishing inaccurate particulars - CIT(A)'s confirmation of penalty - Assessment year 2012-13.

Analysis:

1. The appeal was filed against the penalty imposed under section 271(1)(c) of the Income Tax Act for Assessment Year 2012-13. The grounds of appeal challenged the levy of penalty, disallowances made by the Assessing Officer, and the confirmation of penalty by the CIT(A).

2. The Assessing Officer completed the assessment with disallowances under section 40(a)(ia) and addition on account of interest expenses. Subsequently, penalty proceedings were initiated and concluded with the imposition of a penalty. The assessee, aggrieved by the penalty order, approached the CIT(A) for relief.

3. The main argument raised by the assessee was the invalidity of the notice issued under section 274 read with section 271(1)(c) as it did not specify the charges against which the penalty was levied. The assessee contended that the penalty proceedings were vitiated due to the defective notice. The assessee also argued that there was no concealment of income or furnishing of inaccurate particulars, particularly in relation to disallowances under section 40(a)(ia) and interest expenses.

4. The Tribunal noted that the notice lacked specific charges related to concealment of income or inaccurate particulars, rendering the penalty unjustified. It was observed that the disallowances made by the assessee were based on a genuine belief regarding TDS deductions, and there was no intention to conceal income. The Tribunal cited relevant case law to support its decision and emphasized that penalty proceedings should only be initiated in cases of concealment or inaccurate particulars.

5. The Tribunal highlighted that the CIT(A) failed to provide any valid reasons for upholding the penalty. Additionally, the Tribunal referenced a previous decision in the assessee's favor for the assessment year 2011-12, where the penalty was deleted based on similar grounds. Consequently, the penalty imposed under section 271(1)(c) was set aside, and the appeal of the assessee was allowed.

6. In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the importance of valid notices specifying charges and the absence of concealment or inaccurate particulars in justifying the penalty under section 271(1)(c) of the Income Tax Act for the relevant assessment year.