2019 (12) TMI 879 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee has challenged the order of the AO before the ld.CIT(A) on the ground that AO imposed penalty u/sec.271(1)(c) which is not in accordance with the provisions of the Act - HELD THAT - In this case the AO has issued penalty notice in which the AO has not marked one of the two limbs i.e. concealment of particulars of income or furnishing inaccurate particulars of income and has issued notice in mechanical manner in standard format without application of mind. The notice issued by the AO is not valid as the AO failed to mention the charge on which the penalty was proposed to be levied thereby depriving the assessee to respond to the charge on which the penalty was proposed to be levied. The case is squarely covered by the decision of THE COMMISSIONER OF INCOME TAX-11 VERSUS SHRI SAMSON PERINCHERY 2017 (1) TMI 1292 - BOMBAY HIGH COURT which provides that failure on the part of the AO to state the charge on which the penalty was proposed to be levied would render the penalty order as invalid and ab initio and thus penalty cannot be sustained. - Appeal of assessee is allowed.

Summary

Issues:
Appeal against penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2012-13 and 2013-14.

Analysis:

Issue 1: Penalty Imposition for Concealment of Income
The appeals challenged the penalty imposed under section 271(1)(c) of the Income Tax Act for concealing income during a survey. The Assessing Officer initiated penalty proceedings and levied penalties for both assessment years. The CIT(A) upheld the penalties. The appellant argued that the Assessing Officer failed to record valid satisfaction in the assessment order, as required by law. The appellant cited legal precedents, emphasizing the necessity for specific references to the relevant clause of section 271(1)(c) of the Act. The tribunal noted that while the assessment order mentioned both limbs of the clause, the penalty order did not specify any limb, creating ambiguity. Relying on legal judgments, the tribunal held that the penalty order was unsustainable in law due to the lack of clarity regarding the specific limb of the clause applicable.

Issue 2: Legal Requirement for Penalty Imposition
The tribunal emphasized the legal obligation for Assessing Officers to specify the correct limb under section 271(1)(c) of the Act both at the initiation and imposition of penalties. Referring to judicial decisions, the tribunal highlighted that penalties cannot be imposed without clearly indicating the specific limb contravened. Failure to specify the relevant limb deprives the assessee of the opportunity to prepare a defense. The tribunal stressed the importance of natural justice and clarity in penalty imposition under the Income Tax Act.

Issue 3: Setting Aside Penalties
Considering the legal precedents and the lack of specificity in the penalty orders, the tribunal set aside the penalties imposed by the CIT(A) for both assessment years. The tribunal directed the Assessing Officer to delete the penalties from the appellant's records, as the charges were deemed vague and the penalty imposition lacked legal merit. The decisions for both assessment years were aligned, and the penalties were revoked based on the legal analysis provided by the tribunal.

In conclusion, the tribunal allowed the appeals for both assessment years, 2012-13 and 2013-14, against the penalties imposed under section 271(1)(c) of the Income Tax Act, directing the deletion of penalties based on the legal deficiencies identified in the penalty orders.