2020 (9) TMI 729 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice - non application of mind by AO - Non specification whether the penalty is initiated for concealment of income or furnishing inaccurate particulars of income since both the charges carry different connotations - assessee claimed deduction u/s 10AA @50% - HELD THAT - AO has initiated penalty on both the counts of concealment of income as well as of furnishing of inaccurate particulars of income. In the show cause notice u/s 274 dated 31.03.2014 also none of the twin charges were stuck off. In the penalty order also penalty is levied for both the deafults. We find that issue is squarely covered in favour of the assessee by the decision of Sahara India Insurance Company Ltd 2019 (8) TMI 409 - DELHI HIGH COURT as held that penalty is not sustainable if none of the twin charges in notice u/s 274 of the Act are cancelled/ stuck off. On this issue, it is clear that the penalty levied by the ld AO is not sustainable in law. - Decided in favour of assessee.

Summary

Issues involved:
Challenge against penalty levied under section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Issue: Whether the penalty under section 271(1)(c) of the Act is sustainable.

- Analysis: The assessee filed its return of income for AY 2012-13, claiming deduction under section 10AA of the Act. During assessment proceedings, it was found that the assessee inadvertently claimed deduction on certain income. The assessing officer (AO) initiated penalty proceedings under section 271(1)(c) for concealment of income and furnishing inaccurate particulars. The penalty was confirmed by the CIT(A). The main contention was that the penalty notice did not clearly specify the charge for which penalty was levied, rendering it bad in law. The ITAT held that if none of the twin charges in the notice under section 274 of the Act are canceled/stuck off, the penalty is not sustainable. Citing a Delhi High Court decision, the ITAT canceled the penalty, stating it was not sustainable in law.

2. Decision on Merits:

- Analysis: The assessee's argument challenging the penalty on merit was not addressed as the penalty was canceled based on the defective notice issue. Since the penalty was canceled on procedural grounds, the ITAT did not delve into the merits of the case. The appeal of the assessee was allowed based on the cancellation of the penalty levied under section 271(1)(c) due to the defective notice.

3. Conclusion:

- Analysis: The ITAT allowed the appeal of the assessee, canceling the penalty of ?278,024 levied under section 271(1)(c) of the Act. The decision was based on the procedural flaw in the penalty notice, where the charges were not clearly specified, making the penalty unsustainable in law. The ITAT did not address the merits of the case due to the cancellation of the penalty on procedural grounds.

This detailed analysis of the judgment highlights the issues involved, the arguments presented, and the ultimate decision rendered by the ITAT, providing a comprehensive understanding of the legal aspects involved in the case.