2020 (2) TMI 788 - AT - Income Tax

Levy of Penalty u/s. 271(1)(c) - non specifying the precise charge for imposition of penalty - addition u/s 68 treating long term capital gain as unexplained cash credit - HELD THAT - In the case of furnishing inaccurate particulars of income, the onus is on the Revenue to, prove that the assessee had furnished the inaccurate particulars, while in the case of concealment of particulars of income, where the Explanation 1 is applicable; the onus is on the assessee to prove that he has not concealed the particulars of income. It is apparent from the Explanation-1, this Explanation clearly states where in respect of any facts material to the computation of total income of any person such person fails to offer an explanation or offers explanation which is found by the AO to be false or such person offers an explanation which he is not able to substantiate or fails to prove that such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him. We noted that the AO, failed to discharge his onus as he was not sure at the initiation of penalty under section 271(1)(c) for which specific charge of penalty has been initiated by the AO. Even while levying the penalty also, the AO simply relied on the Explanation 1 to s. 271(1)(c), though he levied the penalty for inaccurate particulars of income . Therefore, in our opinion, the basis of levy of penalty itself is not correct. As apparent from the provisions of s. 271(1)(c) that Explanation-1 of section 271(1)(c) is not applicable in case inaccurate particulars are furnished. Therefore, in our opinion, the basis of levy of penalty itself is not correct. Thus, we direct the assessing officer to delete the penalty. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income and concealment of income.

Analysis:

1. Background:
The appeal was against the order of CIT(A)-45, Mumbai for the assessment year 2014-15, concerning the penalty under section 271(1)(c) of the Income Tax Act, 1961. The AO treated long term capital gain as unexplained cash credit under section 68 and initiated penalty for furnishing inaccurate particulars of income and concealment of income. The penalty was confirmed by CIT(A), leading to the current appeal.

2. Assessee's Arguments:
The assessee argued that the penalty was imposed without specifying the precise charge for penalty initiation and without proper application of mind. The AO initiated penalty for concealment of income but levied it for furnishing inaccurate particulars. The assessee contended that no concealment or inaccurate particulars were involved, and penalty proceedings are distinct from quantum assessment.

3. Revenue's Position:
The revenue contended that the assessee filed inaccurate particulars by claiming bogus entries and did not challenge the addition made in the assessment. The revenue argued that the penalty was correctly imposed and defended the lower authorities' decisions.

4. Tribunal's Decision:
The Tribunal analyzed the provisions of section 271(1)(c) and noted that two distinct charges exist: concealment of income and furnishing inaccurate particulars. The AO failed to specify the charge at penalty initiation and relied on Explanation 1 for concealment, although penalty was levied for inaccurate particulars. The Tribunal held that the penalty basis was incorrect and directed the AO to delete the penalty, citing precedents where penalties were deleted due to lack of proper application of mind.

5. Conclusion:
The Tribunal allowed the assessee's appeal, emphasizing that the penalty was incorrectly imposed without meeting the burden of proof for either charge under section 271(1)(c). The Tribunal's decision was based on the incorrect basis of penalty imposition and the failure to discharge the onus of proof by the AO.