2020 (10) TMI 82 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - defective notice - Non specification of charge - whether the charge is that the assessee has furnished inaccurate particulars of income or it was for concealing particulars of such income in as much as a bare perusal of the said show cause notice clearly reveal that the inappropriate words/unwanted charge has not been struck off? - HELD THAT - In the instance case, we find that the penalty proceedings have been initiated during the course of assessment proceedings for concealing the particulars of income regarding long term capital gains on sale of immovable property and therefore, as far as recording of satisfaction during the course of assessment proceedings, there is no ambiguity. In the instant case, we find that in the show-cause notice, AO has not initiated the penalty on a specific charge and has talked about either concealment of income or furnishing of inaccurate particulars of income, however, while levying the penalty, AO has talked about both concealment of income and furnishing of inaccurate particulars of income. AO has not specified in the penalty order as to how it is a case of applicability of both the charges in the facts and circumstances of the present case. We therefore find that it is a case of lack of application of mind by the AO both at the time of initiation and final levy of penalty and the AO has failed to give a decisive finding even at the time of passing the penalty order. It is a case where the assessee has not disclosed long term capital gains on sale of an immovable property, therefore, it is a case of concealment of income whereas the AO has held the same to be a case of concealment of income as well as furnishing of inaccurate particulars of income - Decided in favour of assessee.

Summary

Issues:
- Challenge against levy of penalty under section 271(1)(c) of the Act for A.Y 2008-09.
- Ambiguity in the initiation and imposition of penalty charges.
- Lack of clarity on whether the charge is for furnishing inaccurate particulars of income or concealing particulars of income.
- Failure to specify a decisive charge for penalty during initiation and imposition.
- Applicability of both charges of concealment of income and furnishing inaccurate particulars of income.

Analysis:
- The appeal was filed against the penalty imposed under section 271(1)(c) of the Act for A.Y 2008-09. The contention raised was regarding the ambiguity in the assessment order and the show cause notice, where it was not clear whether the charge was for furnishing inaccurate particulars of income or concealing particulars of income. The confusion persisted through the penalty order, leading to a lack of clarity on the specific charge for penalty imposition.

- The Assessing Officer (AO) initiated the penalty for concealing income during the assessment proceedings, and the show cause notice mentioned both charges of concealment of income and furnishing inaccurate particulars of income. However, the penalty order did not specify how both charges applied to the case. The AO failed to provide a decisive finding at the time of passing the penalty order, indicating a lack of application of mind in determining the specific charge for penalty imposition.

- The legal principle that concealment of income and furnishing inaccurate particulars of income are distinct charges was highlighted. It was emphasized that the AO must be clear on the specific charge being invoked and, in cases where both charges apply, must mention so in the penalty notice and record a specific finding in the penalty order. Failure to do so can vitiate the penalty order, as seen in the case of HPCL Mittal Energy Ltd. v. ACIT.

- The Tribunal found that the penalty order was vitiated due to the lack of a specific charge for penalty imposition and the confusion regarding the applicability of both charges. Following the jurisdictional High Court's ruling, the penalty was deleted. The Tribunal did not delve into other contentions raised by the parties, as the lack of a specific charge rendered the penalty order invalid.

- In conclusion, the appeal of the assessee was allowed, and the penalty under section 271(1)(c) was deleted due to the AO's failure to specify a decisive charge for penalty imposition, leading to ambiguity in the initiation and imposition of penalty charges.