2021 (7) TMI 977 - AT - Income Tax

Penalty u/s 271(1)(c) - addition of residuary balance of peak credit in foreign bank account with HSBC, Geneva - HELD THAT - Once the addition in dispute has been set aside and restored to the file of the Assessing Officer to be decided afresh, the penalty levied in respect of the addition cannot be survived and it would be at the discretion of the Assessing Officer to re-initiate the penalty proceedings as per law. Accordingly, penalty levied in the case of the assessee is deleted. The grounds of the appeal of the assessee are accordingly allowed.

Summary

Issues:
1. Jurisdiction of the Commissioner of Income Tax (Appeals) in levying penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Confirmation of penalty under section 271(1)(c) in relation to addition of peak balance in a foreign bank account.

Issue 1: Jurisdiction of the Commissioner of Income Tax (Appeals)
The appellant contended that the penalty order under section 271(1)(c) was without jurisdiction, bad in law, and void-ab-initio as it was passed without recording requisite satisfaction in the assessment order under section 143(3) r.w.s. 153A of the Act. It was argued that the penalty order was passed hastily without providing adequate opportunity for a hearing, contrary to the provisions of section 275(1)(a) of the Act. The appellant highlighted that the penalty proceedings should be separate and independent from the assessment proceedings. Additionally, reference was made to the Tribunal's order in a previous year where a similar addition had been deleted, emphasizing that the addition in the current year was dependent on the findings of the previous year that had been set aside.

Issue 2: Confirmation of penalty under section 271(1)(c)
The Assessing Officer had levied a penalty under section 271(1)(c) for furnishing inaccurate particulars of income related to an addition in a foreign bank account. However, the Tribunal had set aside the order of the Commissioner of Income Tax (Appeals) and remanded the matter back to the Assessing Officer for fresh adjudication. The Tribunal observed discrepancies in the assessment process and the lack of authentic documents being confronted to the assessee. Consequently, the Tribunal remanded the matter back for a fair adjudication process. Given the setting aside of the addition in dispute and the restoration of the matter to the Assessing Officer for fresh decision, the penalty levied could not be sustained. The Tribunal held that the penalty could not survive in such circumstances, and it would be up to the Assessing Officer to re-initiate penalty proceedings if required by law. Therefore, the penalty levied on the appellant was deleted, and the grounds of the appeal were allowed.

In conclusion, the appeal of the assessee was allowed, and the penalty under section 271(1)(c) was deleted. The judgment emphasized the importance of a fair and thorough adjudication process, ensuring that penalties are imposed in accordance with the law and after providing adequate opportunities for the assessee to present their case.