2019 (7) TMI 1436 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - furnishing of inaccurate/concealment particulars of income - vagueness and ambiguity in recording of satisfaction - HELD THAT - AO invoked only the charge of furnishing inaccurate particulars of income . It is evident that while recording satisfaction the AO was not clear in his mind as to which charge u/s. 271(1)(c) is to be invoked for initiating penalty. The ambiguity in the mind of Assessing Officer with regard to charge u/s. 271(1)(c) for levy of penalty is evident writ large. The Hon ble Karnataka High Court in the case of Commissioner of Income Tax Vs. Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT has held the assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty should be imposed to the assessee. The manner in which the Assessing Officer has initiated penalty in the instant case clearly shows vagueness in the mind of Assessing Officer with regard to the charge to be invoked for levy of penalty u/s. 271(1)(c) of the Act. Thus, the satisfaction recorded by the Assessing Officer falls short of legal requirement as envisaged by the Hon ble High Court. 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 2005-06.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming the penalty. The assessee failed to appear before the Tribunal despite multiple adjournments, leading to the decision being made with the assistance of the Departmental Representative and available records.

The Assessing Officer initiated penalty proceedings under section 271(1)(c) based on additions made during reassessment. The penalty was levied, and the assessee appealed to the Commissioner of Income Tax (Appeals) and subsequently to the Tribunal.

The Department, represented by Mrs. Shabana Parveen and Shri Vishwas Mundhe, defended the penalty, arguing that the assessee misrepresented sales tax incentives as capital receipts. The Department contended that the additions made by the Assessing Officer were upheld at both appellate stages, justifying the penalty.

Upon review, the Tribunal found that the Assessing Officer's satisfaction for initiating the penalty was unclear. While the satisfaction mentioned both limbs of section 271(1)(c), the penalty was levied only for "furnishing inaccurate particulars of income." This ambiguity in invoking the penalty charge was deemed unsustainable by the Tribunal.

Citing the decision of the Hon'ble Karnataka High Court, the Tribunal emphasized that the assessee must be aware of the specific grounds to be met to ensure natural justice. The vague manner in which the penalty was initiated indicated a lack of clarity on the part of the Assessing Officer, leading to the penalty proceedings being set aside due to vagueness and ambiguity in recording satisfaction.

Ultimately, the Tribunal allowed the appeal, setting aside the impugned order and directing the penalty proceedings to be annulled. The decision was pronounced on July 12, 2019.