2021 (9) TMI 1179 - AT - Income Tax

Penalty u/s 271(1)(c) - Non specification of charge - defective notice u/s 274 - HELD THAT - The perusal of the assessment order passed u/s 143(3) of the Act reveals that AO has recorded the satisfaction that assessee has concealed the income. Thereafter, in the penalty order passed u/s 271(1)(c) of the Act, AO had levied penalty for furnishing of inaccurate particulars of income. It is a settled law that while levying penalty for furnishing of inaccurate particulars of income, the AO has to record satisfaction and thereafter come to a finding in respect of one of the limbs, which is specified under section 271 (1)(c) of the Act. First step is to record satisfaction while completing the assessment as to whether the assessee had concealed her income or furnished inaccurate particulars of income. Thereafter, notice u/s 274 read with Section 271(l)(c) of the Act is to be issued to the assessee - Assessing Officer thereafter has to levy penalty under Section 271(l)(c) of the Act for non-satisfaction of either of the limbs. While completing the assessment, the Assessing Officer has to come to a finding as to whether the assessee has concealed her income or furnished inaccurate particulars of income. As in CIT vs Samson Perinchery 2017 (1) TMI 1292 - BOMBAY HIGH COURT has held that where initiation of penalty is one limb and the levy of penalty is on other limb, then in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax relating to Assessment Year 2015-16. The assessee, engaged in financial services, declared a total income of ?14,25,300. The case was selected for scrutiny, and after due proceedings, the total income was determined at ?24,52,374, with an addition of ?10,27,074. A penalty of ?3,17,366 was levied under section 271(1)(c) for alleged concealment of income. The CIT(A) upheld the penalty, leading to the appeal before the ITAT Delhi.

The grounds of appeal raised by the assessee challenged the penalty imposition, contending that the penalty was wrongly imposed as the appellant had not concealed income or furnished inaccurate particulars. The appellant argued that the penalty was unjustified due to the inability to provide current addresses of agents for commission payments. The appellant also highlighted that the penalty was levied for furnishing inaccurate particulars of income, which was not the basis for initiating the penalty proceedings.

During the hearing, the assessee did not appear, and the matter proceeded ex-parte. The Departmental Representative supported the penalty order. The issue before the ITAT was whether the penalty under section 271(1)(c) was justified. The AO had recorded satisfaction of income concealment during assessment but imposed the penalty for furnishing inaccurate particulars of income. The ITAT noted that for penalty under section 271(1)(c), the AO must satisfy one of the specified limbs during assessment and issue a proper show cause notice. Citing a precedent, the ITAT emphasized the importance of proper procedure in penalty imposition.

The ITAT, considering the legal position and the facts of the case, concluded that the basic condition for penalty imposition was not fulfilled. It held that the penalty order lacked proper exercise of jurisdiction power by the AO, leading to the penalty being set aside. Consequently, the appeal of the assessee was allowed, and the penalty order was overturned.

In conclusion, the ITAT Delhi ruled in favor of the assessee, setting aside the penalty order under section 271(1)(c) due to procedural deficiencies and lack of fulfillment of basic conditions for penalty imposition.