2020 (3) TMI 865 - AT - Income Tax

Penalty levied u/s 271(1)(c) - AO has nowhere specified that the penalty was either for concealment of income or for filing inaccurate particulars of income - HELD THAT - We find that in the assessment order for all the three years the penalty has been initiated for concealment of income whereas in the notices issued for all the three years, penalty has been initiated for concealing the particulars of income or furnishing of inaccurate particulars of the income. In the penalty order the AO has held the assessee was liable for penalty for concealing its income by furnishing inaccurate particulars of the income. Thus, it is evident that the Assessing Officer is not certain on the charges the penalty has been levied whether it is concealment of income or furnishing of inaccurate particulars of income. The dictionary meaning of the word conceal is to hide, withdraw or remove from observation ; cover or keep from sight ; to avoid disclosing or divulging . Thus, concealment of particular of income means non-disclosure of particulars of income. On the other hand, where particulars are disclosed but such disclosure is not correct, true or accurate, it would amount to furnishing of inaccurate particulars of income . Thus, the two changes of levy of penalty are different. Hon ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT has cancelled the penalty where the Assessing Officer failed to strike out the specific reason of levy of penalty in the notice issued. In the case SSA Emerald Meadows 2016 (8) TMI 1145 - SC ORDER has also cancelled the penalty u/s 271(1)(c) in absence of charges of levy not clear in the notice issued. Hon ble High Court recently in the case of Pr. CIT Vs. M/s. Sahara India Life Insurance Company Ltd., 2019 (8) TMI 409 - DELHI HIGH COURT following the decision of Hon ble Supreme Court in the case of M/s. SSA Emerald Meadows (supra) confirmed cancellation of penalty. Set aside and the penalty levied u/s 271(1)(c) of the Act in all the three assessment years are cancelled - Decided in favour of assessee.

Summary

Issues involved:
- Appeal against penalty orders under section 271(1)(c) of the Income Tax Act for assessment years 2005-06, 2009-10, and 2010-11.
- Whether the penalty was levied for concealment of income or furnishing inaccurate particulars of income.
- Adequate opportunity of being heard to the appellant.
- Justification of penalty amounts imposed.
- Compliance with legal requirements in initiating penalty proceedings.

Analysis:

Issue 1: Grounds of appeal
The appeals challenged penalty orders under section 271(1)(c) for the three assessment years. The appellant contended that the penalty orders were invalid and bad in law as the nature of the penalty (concealment of income or inaccurate particulars) was not discernible from the notice issued. It was argued that the appellant was not afforded adequate opportunity of being heard.

Issue 2: Penalty justification
The Assessing Officer initiated penalty proceedings under section 271(1)(c) based on additions made in the quantum assessment proceedings for all three assessment years. The CIT(A) upheld the penalty, stating that the appellant failed to provide a bona fide explanation and did not prove the genuineness of transactions. The CIT(A) found that the appellant concealed income and furnished inaccurate particulars deliberately.

Issue 3: Compliance with legal requirements
The appellant argued that the penalty notices did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, citing legal precedents. The Tribunal observed discrepancies in the charges mentioned in the assessment order, notice, and penalty order, leading to ambiguity in the nature of the penalty. Citing relevant legal judgments, the Tribunal canceled the penalties for all three assessment years due to the lack of clarity in the charges specified in the notices.

Conclusion:
The Tribunal allowed all three appeals, canceling the penalties imposed under section 271(1)(c) for the assessment years in question. The decision was based on the failure to specify the grounds for penalty in the notices issued, in line with legal precedents. The Tribunal's ruling emphasized the importance of clarity in specifying the nature of charges when initiating penalty proceedings.