2021 (7) TMI 94 - AT - Income Tax

Penalty u/s 271(1)(c) - AO has verified during the assessment that the assessee did not furnish any documents on record to prove that the assets were put to use - CIT (A) deleting the penalty u/s 271(1)(c) on the grounds that appellant should not penalized merely for showing the receipt of consultancy as other income - HELD THAT - Assessment order passed in this case shows that the AO has failed to record a valid satisfaction to initiate the penalty proceedings u/s 271(1)(c) because he has merely recorded that, penalty proceedings u/s 271(1)(c), u/s 271B and 271F of the Income Tax Act, 1961, have been initiated separately , without specifying if the assessee has furnished concealment of particulars of income or has furnished inaccurate particulars of income. Even at the time of passing of penalty order, AO was not clear enough as to whether he is going to levy the penalty for concealment of particulars of income or has furnished inaccurate particulars of income. AO was required to satisfy himself as to under which limb of section 271(1)(c) of the Act he is initiating the penalty proceedings and only thereafter penalty can be levied. In the instant case, AO was neither satisfied/aware at the time of recording a satisfaction in the assessment order nor he was clear enough at the time of penalty proceedings as to under which of the limb of section 271(1)(c) he is going to levy the penalty. - Decided in favour of assessee.

Summary

Issues:
- Penalty u/s 271(1)(c) for alleged incorrect claim of business loss
- Concealment of income or furnishing inaccurate particulars of income

Penalty u/s 271(1)(c) for alleged incorrect claim of business loss:
The Appellant, ACIT, sought to set aside the penalty order passed by the Commissioner of Income-tax (Appeals) affirming the penalty order u/s 271(1)(c) of the Income-tax Act for the assessment year 2009-10. The penalty was imposed due to the disallowance of depreciation claimed by the assessee. The ld. CIT (A) deleted the penalty levied by the AO, citing that the claim of carry forward of business loss was involuntary due to system considerations in e-filing the return, and there was no intention to claim the business loss. The Tribunal upheld the decision, emphasizing that there was no concealment of income or furnishing of inaccurate particulars of income by the assessee.

Concealment of income or furnishing inaccurate particulars of income:
The primary issue was whether the assessee had concealed particulars of income or furnished inaccurate particulars of income during the assessment proceedings. The ld. CIT (A) deleted the penalty under section 271(1)(c) by considering various factors. The AO had disallowed depreciation claimed by the assessee, alleging that assets were not put to use based on consultancy income reflected as 'other income'. However, the ld. CIT (A) found that substantial consultancy receipts indicated the assets were utilized. The Tribunal concurred, citing the Hon'ble Supreme Court's decision that incorrect claims do not amount to furnishing inaccurate particulars. Moreover, the assessment order lacked a valid satisfaction to initiate penalty proceedings, as the AO did not specify the grounds for penalty under section 271(1)(c). Therefore, the Tribunal dismissed the Revenue's appeal, upholding the deletion of the penalty by the ld. CIT (A).

This detailed analysis of the legal judgment highlights the key issues of penalty imposition for an alleged incorrect claim of business loss and the question of concealment or furnishing of inaccurate particulars of income. The judgment emphasizes the importance of valid grounds for penalty imposition and the distinction between incorrect claims and intentional concealment.