2019 (10) TMI 1176 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Non specification of charge - HELD THAT - Penalty proceedings have been initiated during the course of assessment proceedings and the show cause notice issued by the Assessing Officer u/s 274 read with 271(1)(c). Show-cause notice dated 31.12.2010 has initiated the penalty proceedings for concealed the particulars of income or furnished inaccurate particulars of such income and subsequently, while passing the penalty order, the AO has levied penalty for furnishing inaccurate particulars of income. We therefore find that though the AO has not initiated the penalty on a specific charge, however, while levying the penalty, the Assessing officer has levied the penalty for furnishing of inaccurate particulars of income. At the same time, it is also noted on perusal of the penalty order that the finding so given is not specific to three separate disallowances and the AO has merely gone by the order of the Tribunal in the quantum proceedings where additions have been sustained and has not given any specific finding as to how the disallowances so made and sustained results in furnishing of inaccurate particulars of income. In case of Shweta construction 2016 (12) TMI 1603 - RAJASTHAN HIGH COURT has held that the Assessing officer has to give a specific notice while initiating the penalty proceedings itself. In the instant case, the show-cause notice is not specific as to the charge for levy of penalty which shows non-application of mind by the Assessing officer and hence, respectfully following the decision of the Hon ble Rajasthan High Court, the consequent penalty order cannot be sustained. In the result, the penalty so levied by the Assessing officer is directed to be deleted. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) challenged by the assessee.

Analysis:
The appeal was filed by the assessee against the order confirming the levy of penalty under section 271(1)(c) by the ld. CIT(A). The assessment was completed under section 143(3) of the Act, determining total income after various disallowances and additions. The AO had levied a penalty against which the assessee appealed, leading to the current proceedings.

The first ground of appeal by the assessee questioned the lack of explicit satisfaction by the AO regarding concealing or furnishing inaccurate particulars of income in the assessment order or the notice under section 271(1)(c). Citing the Sheveta Construction Co. Pvt. Ltd. case, the assessee argued that the penalty was invalid due to the vague foundation for initiation.

The assessee contended that the AO's failure to specify the grounds for penalty initiation explicitly in the assessment order and notice rendered the penalty unjustifiable. Referring to relevant case laws, the assessee argued that penalty under section 271(1)(c) should only be levied when there is a clear finding of concealment or furnishing inaccurate particulars of income.

The decision of the Hon'ble Rajasthan High Court in the Sheveta Construction Co. Pvt. Ltd. case was discussed, emphasizing the importance of the AO recording specific satisfaction in the assessment order before imposing a penalty. The Court highlighted the need for clarity in the penalty proceedings and the necessity to specify the grounds for initiating penalty under section 271(1)(c).

The Tribunal analyzed the show-cause notice issued by the AO, which indicated the initiation of penalty proceedings for concealing or furnishing inaccurate particulars of income. While the AO had not initiated the penalty on a specific charge, the penalty was levied for furnishing inaccurate particulars of income. However, the Tribunal found that the lack of specific charge in the show-cause notice indicated non-application of mind by the AO, leading to the direction to delete the penalty.

In conclusion, the Tribunal allowed the appeal of the assessee, citing the non-specific nature of the charge in the show-cause notice as the basis for deleting the penalty imposed by the AO. The decision was in line with the principles established by the Hon'ble Rajasthan High Court regarding the necessity for clarity and specific grounds in penalty proceedings.