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2020 (3) TMI 590 - AT - Income TaxPenalty u/s. 271(1)(c) - Defective notice - specific reason/charge against the Appellant for levy of penalty - inadmissible claim of deduction u/s 10B - HELD THAT - In the instant case, the AO had issued a show-cause notice u/s 274 r.w.s 271 dated 28.01.2014 and served it on the assessee. There was no response by the assessee to that show-cause notice. Thereafter the AO issued another show-cause notice dated 02.07.2014 to the assessee. In response to it the assessee filed a reply date 10.07.2014 before the AO. As mentioned earlier, the AO has initiated the penalty proceedings not only for furnishing inaccurate particulars of income but also for having concealed the income and subsequently levied penalty having considered the above two ingredients. Therefore following the order in Samson Perincherry 2017 (1) TMI 1292 - BOMBAY HIGH COURT and in Mak Data P. Ltd. 2013 (11) TMI 14 - SUPREME COURT we hold that there is no technical defect in initiating the penalty proceedings u/s 271(1)(c) of the Act. Thus the first ground of appeal is decided against the assessee. Inadmissible claim of deduction u/s 10B - In the instant case, as mentioned earlier the appellant filed a letter dated 14.12.2012 intimating the revision of its return filed on 05.12.2012 u/s 139(5) and the reasons for revision of the said original return. The AO accepting the said revised return passed an assessment order u/s 143(3) without making any further adjustments, except by observing at para 4 that by putting inadmissible claim of deduction u/s 10B, the assessee has not only furnished inaccurate particulars of income but also concealed income within the meaning of section 271(1)(c) of the Act. It is relevant to mention here that the AO accepted the revised return and made assessment. If he accepted the revised return, there was no question of making inadmissible claim of deduction u/s 10B in such revised return. In fact, there is no concealment or inaccurate furnishing of income in such revised return. We delete the penalty levied by the AO u/s 271(1)(c) - Decided in favour of assessee
Issues Involved:
1. Validity of the notice issued under section 274 read with section 271(1)(c) of the Income Tax Act, 1961. 2. Justification for the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961, for furnishing inaccurate particulars and concealing income. 3. Calculation of the penalty amount under section 271(1)(c) of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Validity of the Notice Issued Under Section 274 Read with Section 271(1)(c) The appellant contested the validity of the notice issued under section 274 read with section 271(1)(c), arguing that the notice was issued in a standard proforma without specifying the precise charge for the levy of penalty. The appellant cited various judicial pronouncements to support their claim that such a notice is invalid and ab initio void. The Tribunal referred to the decision in CIT vs. Samson Perincherry, where the Bombay High Court held that the satisfaction of the Assessing Officer (AO) must be with regard to one of the two breaches mentioned under section 271(1)(c) for initiating penalty proceedings. The Tribunal also considered the Supreme Court's decision in Mak Data P. Ltd., which stated that the AO is not required to record his satisfaction in a particular manner or reduce it into writing. The Tribunal concluded that there was no technical defect in initiating the penalty proceedings under section 271(1)(c) as the AO had initiated the proceedings for both furnishing inaccurate particulars and concealing income. Thus, the first ground of appeal was decided against the assessee. Issue 2: Justification for the Levy of Penalty Under Section 271(1)(c) The Tribunal examined whether the appellant's actions justified the levy of penalty under section 271(1)(c). The appellant had initially claimed a deduction under section 10B based on an audit report in Form 56G. Upon realizing the mistake, the appellant filed a revised return withdrawing the claim. The AO accepted the revised return but initiated penalty proceedings, arguing that the appellant had furnished inaccurate particulars and concealed income. The Tribunal noted that the appellant had a bona fide belief in the validity of the claim based on the audit report and had revised the return voluntarily before any specific detection by the AO. The Tribunal cited several cases, including Bombay Cloth Syndicate v. CIT and CIT v. Backbone Enterprises, where penalties were not imposed in similar circumstances. The Tribunal found merit in the appellant's contention that the claim was based on a bona fide belief and that the revised return was filed voluntarily. Consequently, the Tribunal deleted the penalty of ?1,58,30,000 levied by the AO under section 271(1)(c). Issue 3: Calculation of the Penalty Amount Given that the Tribunal deleted the penalty under section 271(1)(c), the third issue regarding the calculation of the penalty amount became redundant. Conclusion: The appeal was partly allowed. The Tribunal upheld the validity of the notice issued under section 274 read with section 271(1)(c) but deleted the penalty on the grounds that the appellant had a bona fide belief in the claim and voluntarily revised the return before any specific detection by the AO. The third ground of appeal regarding the calculation of the penalty amount was rendered redundant.
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