2021 (8) TMI 282 - AT - Income Tax

Penalty u/s. 271(1)(c) - Non specification of fixed charge against assessee - whether the proceedings were initiated for concealing income or furnishing inaccurate particulars of income? - HELD THAT - We have examined the notice under section 271(1)(c) of the Act and observed that assessing officer has not ticked any of the limbs whether he has initiated the penalty on account of furnishing inaccurate particulars of income or concealment of particulars of income. From the notice for initiation of penalty under section 271(1)(c) of the Act we see that there is no fix charge whether assessee has concealed the particulars of income or furnished inaccurate particulars of income. That is assessing officer has not ticked any of the limbs for initiation of the penalty. It is by now well settled that while issuing a notice under section 271(1)(c) of the Act the Assessing Officer is required to specify as to what is the default on the part of the assessee as to whether the case is one of furnishing inaccurate particulars or whether it is a case of concealment of income or both. As no clear finding was given by the assessing officer regarding the invocation of the limb in the penalty notice. We note that Hon ble Supreme Court in the case of T. Ashok Pai 2007 (5) TMI 199 - SUPREME COURT held that concealment of income and furnishing of inaccurate particulars of income carry different connotations. From the facts of the present case it is abundantly clear that Assessing Officer has not fixed the charge on the assessee. - AO has made addition and initiated penalty for violation of section 11(3)(d) of the Act (vide assessment order page No. 23) whereas the penalty is levied in penalty order for violation of section 11(3)(c) of the Act as per para-3 of penalty order. Therefore assessing officer is not aware as to what account he has initiated the penalty proceedings. The assessee s accounts are not rejected by the assessing officer and merely because the assessee could not file Form No. 10 before the Department does not mean that assessee has furnished inaccurate particulars of its income - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty order under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2011-12.

Analysis:
1. The appeal was filed against the penalty order passed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The assessing officer had levied a penalty of ?2,00,060 on the assessee trust for accumulating income and not utilizing it for the specified purpose. The penalty was confirmed by the ld. CIT(A), leading to the appeal before the Appellate Tribunal.

2. The grounds of appeal raised by the assessee included challenging the justification of the penalty under section 271(1)(c) of the Act. The assessing officer's failure to specify whether the proceedings were initiated for concealing income or furnishing inaccurate particulars of income was also highlighted, citing a decision of the Gujarat High Court. The assessee requested the flexibility to add, alter, or vary any grounds of appeal.

3. During the assessment proceedings, it was found that the assessee trust had accumulated income but failed to provide a satisfactory explanation or necessary documentation. The assessing officer made an addition to the income and subsequently initiated penalty proceedings under section 271(1)(c) of the Act, leading to the imposition of a penalty of ?2,00,060.

4. The ld. CIT(A) upheld the penalty under section 271(1)(c) of the Act, prompting the assessee to appeal further. The arguments presented by the assessee's counsel focused on the incorrect taxability assessment of accumulated income and the discrepancies in the penalty notice issued by the assessing officer.

5. The Appellate Tribunal noted that the assessing officer had not specified the grounds for initiating the penalty in the notice under section 271(1)(c) of the Act. The absence of a clear charge regarding concealment of income or furnishing inaccurate particulars of income was highlighted, emphasizing the importance of such specificity as per legal precedents.

6. The assessing officer's confusion between different sections of the Act in the penalty order was noted, indicating a lack of clarity in the penalty proceedings. The Tribunal observed that the penalty was based on incorrect premises and lacked relevance to the actual provisions of the Act.

7. Referring to legal principles, the Tribunal emphasized the discretion in imposing penalties based on the nature and severity of the default. Citing relevant court decisions, the Tribunal concluded that in the present case, the penalty should not be imposed on the assessee due to technicalities and lack of willful misconduct.

8. Consequently, the Tribunal allowed the appeal filed by the assessee, leading to the deletion of the penalty of ?2,00,060 imposed under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2011-12. The decision was pronounced on 29/07/2021.