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2021 (1) TMI 773 - AT - Income TaxPenalty u/s 271(1)(c) - Mandation of recording satisfaction - disallowance u/s 14A - HELD THAT - It is a settled law that while levying penalty for concealment, the AO has to record satisfaction and thereafter come to a finding in respect of one of the limbs, which is specified under section 271(1)(c) of the Act. The first step is to record satisfaction while completing the assessment as to whether the assessee had concealed its income or furnished inaccurate particulars of income. Thereafter, notice u/s 274 read with Section 271(1)(c) of the Act is to be issued to the assessee. AO has to levy penalty under Section 271(1)(c) for non-satisfaction of either of the limbs. While completing the assessment, the Assessing Officer has to come to a finding as to whether the assessee has concealed its income or furnished inaccurate particulars of income. For the imposition of penalty u/s 271(1)(c) of the Act either concealment of particulars of income or furnishing inaccurate particulars of such income are since qua non. It is a settled law that penalty cannot be imposed for alleged breach of one limb of Section 271(1)(c) while penalty proceedings are initiated for breach of other limb of the section. - Decided in favour of assessee.
Issues Involved:
Levy of penalty under Section 271(1)(c) of the Income Tax Act for disallowance of expenses under Section 14A. Detailed Analysis: 1. Background and Assessment Order: The case involves an appeal against the order of the Commissioner of Income Tax (A)-I, New Delhi relating to Assessment Year 2012-13. The assessee, a real estate company, declared a loss in its income tax return. The assessment was framed under section 143(3) of the Act, determining the total loss with a disallowance under section 14A r.w.r 8D. Subsequently, a penalty was imposed under section 271(1)(c) for the disallowance. 2. Grounds of Appeal: The assessee raised multiple grounds challenging the penalty order, including contentions regarding the applicability of section 271(1)(c), concealment of income, and the basis for levying the penalty. The grounds emphasized that the disallowance under section 14A should not be the sole basis for penalty imposition. 3. Ex-Parte Proceedings and Controversy: During the hearing, the assessee was absent, leading to an ex-parte disposal of the appeal. The main controversy revolved around the levy of penalty under section 271(1)(c) of the Act. 4. Arguments and Decision: The Revenue argued in favor of upholding the penalty, citing the disallowance amount and the justification provided by the AO and CIT(A). However, the Tribunal found that no clear satisfaction was recorded by the AO regarding concealment or furnishing inaccurate particulars of income. 5. Legal Interpretation and Ruling: The Tribunal highlighted the necessity of recording satisfaction and making a clear finding under section 271(1)(c) for either concealment or inaccurate particulars. It emphasized that penalty cannot be imposed for one limb while the penalty proceedings are initiated for a breach of another limb. Consequently, the Tribunal directed the deletion of the penalty, allowing the appeal of the assessee. 6. Final Decision: The Tribunal pronounced the order on 16.12.2020, allowing the appeal of the assessee and directing the deletion of the penalty imposed under section 271(1)(c) of the Income Tax Act for the disallowance under section 14A.
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