2021 (2) TMI 471 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee offered additional income during the search and has paid taxes on the same - Assessment order passed pursuant to notice under section 153C - HELD THAT - No addition has been made by the Ld.AO on such income offered by assessee and has been accepted by the revenue. We note that, while passing the assessment order the Ld.AO recorded satisfaction in respect of concealment towards the additional income offered by assessee based on the seized material. The notice issued under section 274 of the Act is for both the limbs being filing of inaccurate particulars of income as well as concealment. On a careful perusal of the penalty order passed by the Ld.AO, it is clear that all throughout the submissions made by assessee was in respect of concealment of income regarding the additional sale consideration of land, the Ld.AO levies penalty for furnishing inaccurate particulars of sale consideration of the land. This in our opinion is a clear nonapplication of mind by the Ld.AO. Penalty was initiated by the Ld.AO therein in assessment order passed pursuant to notice under section 153C of the Act, wherein assessee therein declared additional income in the returns filed in response to notice under section 153C of the Act. As decided in Rajkumar Gulab Badgujar 2019 (9) TMI 360 - SC ORDER where no addition to the income declared by the searched person in the return filed pursuant to search is made it is not open to the revenue to levy penalty by virtue of Explanation 5 to section 271 - Decided in favour of assessee.

Summary

Issues:
1. Penalty appeal against order passed by Ld.CIT(A) under section 251(1) of the Act.
2. Validity of notice issued under section 271(1)(c) of the Act.
3. Proper jurisdiction for initiating penalty.
4. Concealment of income and furnishing inaccurate particulars.
5. Discretion in levying penalty.
6. Independence of penalty proceedings from assessment proceedings.
7. Excessive penalty amount.

Issue 1: Penalty Appeal Against Ld.CIT(A) Order:
The appellant filed a penalty appeal against the Ld.CIT(A)'s order, challenging the decision under section 251(1) of the Act. The grounds of appeal included opposition to the order based on law, weight of evidence, and circumstances of the case.

Issue 2: Validity of Notice Under Section 271(1)(c):
The appellant contested the validity of the notice issued under section 271(1)(c) of the Act, arguing that it was erroneous and lacked proper jurisdiction. The appellant emphasized that the notice was defective, leading to subsequent actions being unlawful.

Issue 3: Proper Jurisdiction for Initiating Penalty:
The appellant raised concerns regarding the jurisdiction for initiating the penalty, highlighting that the Assessing Officer did not record satisfaction in the assessment order. The appellant argued that the penalty proceedings lacked proper jurisdiction due to the absence of a valid notice.

Issue 4: Concealment of Income and Furnishing Inaccurate Particulars:
The case involved allegations of concealment of income and furnishing inaccurate particulars. The Assessing Officer found discrepancies in the declared sale consideration and interest income, leading to penalty proceedings under section 271(1)(c) of the Act.

Issue 5: Discretion in Levying Penalty:
The appellant argued that the penalty was not automatic and that there was discretion in not levying it. The appellant contended that the Assessing Officer should have exercised discretion and not resorted to penalty proceedings merely as a procedural matter.

Issue 6: Independence of Penalty Proceedings:
The appellant emphasized the independence of penalty proceedings from assessment proceedings, highlighting that the penalty should be based on separate considerations. The appellant raised concerns about the Assessing Officer's failure to distinguish between assessment and penalty proceedings.

Issue 7: Excessive Penalty Amount:
Lastly, the appellant challenged the excessive penalty amount imposed, arguing that no income was concealed or inaccurate particulars furnished. The appellant sought a substantial reduction in the penalty amount, claiming that the penalty was unwarranted based on the facts of the case.

In the judgment, the ITAT Bangalore considered the appellant's arguments and the Assessing Officer's findings. The tribunal noted that the appellant had offered additional income during the search, which was accepted by the revenue without any additions made by the Assessing Officer. The tribunal observed that the penalty for furnishing inaccurate particulars was imposed despite the submissions focusing on concealment of income, indicating a lack of proper assessment by the Assessing Officer.

The tribunal referred to a Supreme Court decision and a Bombay High Court decision, which emphasized that no penalty could be levied on income offered and taxed in response to a notice under section 153C of the Act without any additions by the Assessing Officer. Based on this precedent and the specific facts of the case, the tribunal concluded that the penalty deserved to be deleted, especially considering that the only addition made was related to agricultural income, for which penalty proceedings were not initiated.

Ultimately, the tribunal allowed the grounds raised by the appellant, leading to the appeal being allowed, and the penalty levied by the Assessing Officer was deleted.