2021 (2) TMI 328 - AT - Income Tax

Rectification u/s 254 - Tribunal allowed the appeal of the assessee on technical ground and deleted the penalty levied u/s 271(1)(c) - HELD THAT - Proposition of applicant Revenue that the mistake in non striking of one limb is curable under section 292B of the Act does not stand since for levying penalty under section 271 (1 )(c) of the Act, dictate of section and various Courts implementing the section is that the Assessing Officer has to record satisfaction as to which limb of said section has not been complied with by the assessee and show cause the assessee in this regard while initiating penalty proceedings under section 271 (1 )(c) of the Act. The failure of the Assessing Officer to record such satisfaction makes the order levying penalty invalid and bad in law and such mistake is not curable defect under section 292B of the Act as it goes to the jurisdiction of levy of penalty for concealment. No mistake apparent from record within the purview of Section 254(2) of the Act and hence, Miscellaneous Application filed by the Revenue is dismissed on all counts.

Summary

Issues:
Rectification in order of Tribunal dated 27.03.2019 under ITA No.1853/PUN/2016 for assessment year 2011-12 u/s. 254(2) of the Income Tax Act, 1961 sought by Revenue.

Analysis:
The Revenue filed a Miscellaneous Application seeking rectification in the Tribunal's order that deleted a penalty levied under section 271(1)(c) of the Act. The Revenue contended that the Tribunal's decision was based on a technical ground, not appreciating that the initiation of penalty should cover both limbs - inaccurate particulars of income and concealment of income. The Revenue relied on the decision of the Hon'ble Supreme Court in MAK Data (P) Ltd. vs. CIT-II. However, the Assessee argued that the Revenue's application did not demonstrate a mistake apparent from the record, aiming to re-argue the matter, which is impermissible under Section 254(2) of the Act.

The Assessee relied on the decisions of the Hon'ble Bombay High Court and the Hon'ble Karnataka High Court, emphasizing the importance of natural justice in penalty proceedings under section 271(1)(c) of the Act. The Tribunal, following these decisions, emphasized that the Assessing Officer must be clear on which limb the penalty is imposed to allow the Assessee to prepare a defense. The Tribunal set aside the penalty, highlighting the necessity for clarity in penalty imposition.

Regarding the Revenue's reference to Section 292B of the Act, the Assessee cited a decision of the Pune Bench of the Tribunal, emphasizing that failure to record satisfaction on which limb of section 271(1)(c) has been contravened makes the penalty order invalid. The Tribunal concurred with the Assessee's arguments, dismissing the Revenue's Miscellaneous Application as there was no mistake apparent from the record under Section 254(2) of the Act. The Tribunal upheld the previous decision and dismissed the Revenue's application.

In conclusion, the Tribunal dismissed the Miscellaneous Application filed by the Revenue, upholding its earlier decision in ITA No.1853/PUN/2016. The judgment emphasized the importance of clarity in penalty imposition and adherence to principles of natural justice in such proceedings.