2019 (8) TMI 765 - AT - Income Tax

Penalty u/s 271(1) - defective notice - non specification the appropriate limb of clause (c) of section 271(1) - HELD THAT - We are of the opinion that the legal requirement of making a clear cut reference to the applicable limb of clause (c) of section 271(1) is not met by the AO while initiating and levying the penalty u/s 271(1)(c). Thus, the satisfaction of the Assessing Officer suffers from ambiguity in his mind. Therefore we are of the view that such penalty is unsustainable in law legally. It is a settled legal proposition that the Assessing Officer is under obligation to specify the appropriate limb of clause (c) of section 271(1) at the time of initiation as well as at the time of levy of penalty. In view of the above deliberation on this issue, without going into the merits of the case, we set-aside the order of the CIT(A) and direct the Assessing Officer to delete the entire penalty imposed by him. Accordingly, the legal ground raised by the assessee is allowed.

Issues involved:
Appeal against penalty levied by Assessing Officer u/s 271(1)(c) of the Act for concealment of income or furnishing inaccurate particulars of income. Legal issue of ambiguity in satisfaction recorded by Assessing Officer while initiating and levying penalty.

Detailed Analysis:

Issue 1: Appeal against penalty levied by Assessing Officer
The assessee filed six appeals against the common orders of CIT(A)-9, Pune for the Assessment Years 2005-06 to 2010-11. The lead case for adjudication was ITA No.880/PUN/2017 for the assessment year 2005-06. The grounds raised by the assessee in this appeal pertained to the confirmation of penalty of ?12,36,651 by the CIT(A). The relevant facts included the assessee being an Admission Agent, a search and seizure action conducted on the assessee, and the initiation of penalty proceedings by the Assessing Officer for concealment of income or furnishing inaccurate particulars of income. The CIT(A) upheld the penalty, leading to the assessee's appeal before the Tribunal.

Issue 2: Ambiguity in satisfaction recorded by Assessing Officer
The legal issue revolved around the ambiguity in the mind of the Assessing Officer while dealing with the initiation and levy of penalty u/s 271(1)(c) of the Act. The Assessing Officer failed to specify the applicable limb of clause (c) of section 271(1) of the Act clearly, leading to ambiguity in satisfaction. The Tribunal, after considering various judgments, concluded that the penalty was unsustainable in law due to the Assessing Officer's failure to meet the legal requirement of making a clear reference to the specific limb of clause (c) of section 271(1) of the Act. The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to delete the entire penalty imposed.

Additional Issues:
The Tribunal allowed all six appeals of the assessee partly, including the rest of the five appeals for the assessment years 2006-07 to 2010-11, due to the commonality of issues. The legal grounds in these appeals were also allowed in favor of the assessee. The Tribunal emphasized that the relief granted on the legal issue made the adjudication of other grounds on merits an academic exercise, leading to the dismissal of other grounds as academic.

In conclusion, the Tribunal partly allowed all six appeals of the assessee, highlighting the legal issue of ambiguity in the satisfaction recorded by the Assessing Officer while initiating and levying the penalty u/s 271(1)(c) of the Act. The Tribunal's decision focused on the legal requirement of specifying the appropriate limb of clause (c) of section 271(1) of the Act and set aside the penalty imposed by the Assessing Officer.

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