2020 (2) TMI 258 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Defective notice - penalty proceedings have been initiated, whether for concealment of particulars of income or furnishing inaccurate particulars of income - A.O. disallowed interest income and electricity expenses - HELD THAT - As decided in own case 2017 (12) TMI 257 - ITAT DELHI AO did not record his satisfaction for initiation of penalty proceedings, because while passing the assessment order u/s. 143(3)(ii) AO has stated that Penalty proceedings u/s. 271(1)(c)is being initiated separately for furnishing inaccurate particulars of income / concealment income , which is not sufficient and therefore, the penalty proceedings cannot be said to be validly initiated under such circumstances. However, nowhere in the assessment order states the specific charge of alleged concealment and / or furnishing of inaccurate particulars of income. Therefore, the entire penalty proceedings stand vitiated, because it is not in accordance with law - Decided in favour of assessee.

Summary

Issues:
Challenge to levy of penalty under section 271(1)(c) of the I.T. Act, 1961.

Analysis:
The appeal was against the Order of the Ld. CIT(A)-I, New Delhi, challenging the penalty under section 271(1)(c) of the I.T. Act, 1961. The A.O. disallowed interest income and electricity expenses, initiating penalty proceedings on 27.02.2015. The A.O. confirmed the penalty under section 271(1)(c), which was upheld by the Ld. CIT(A). The Assessee argued that the notice issued did not specify the limb of Section 271(1)(c) under which the penalty was initiated, rendering it void abinitio. The ITAT, Delhi Bench had previously allowed a similar appeal for the Assessee for A.Y. 2009-2010. The Tribunal found that the AO did not record satisfaction for initiating the penalty proceedings, rendering the entire penalty proceedings invalid.

The ITAT noted that the AO's assessment order did not specify the charge of alleged concealment or furnishing of inaccurate particulars of income. Citing relevant case laws, the Tribunal held that the penalty proceedings were not validly initiated. Referring to judgments by the Karnataka High Court and the Supreme Court, the Tribunal deleted the penalty in dispute, deciding in favor of the Assessee and against the Revenue. The Ld. D.R. did not dispute these findings. Consequently, the Tribunal set aside the Orders of the authorities below and canceled the penalty, allowing the Assessee's appeal.

In conclusion, the Tribunal found that the issue was covered in favor of the Assessee by the previous Tribunal order and deleted the penalty in dispute. The decision was based on the lack of valid initiation of penalty proceedings and the failure to specify the charge of concealment or furnishing inaccurate particulars of income in the assessment order. The appeal of the Assessee was allowed, and the penalty was canceled.