2022 (4) TMI 273 - AT - Income Tax

Penalty u/s 271(1)(c) - Non specification of charge - not recording the satisfaction of concealment and/or filing of inaccurate particulars of income - HELD THAT - It is observed from the assessment order that after discussing the claim made by the assessee and disallowing the same, the AO has recorded, Penalty proceedings u/s 271(1)(c) are being initiated separately for concealment /furnishing inaccurate particulars of its income. Since, in the present case, the satisfaction of concealment/furnishing of inaccurate particulars of income have been recorded in the body of the Assessment Order, it can be said that the specific limb invoked for levy of penalty have not been clearly mentioned. Further, vide the penalty order dated 08.09.2016 at para 5, the ITO has imposed penalty u/s 271(1)(c) of the Income Tax Act, 1961 for concealment of income/furnishing of inaccurate particulars of income . Since the AO has not been specified u/s 274 as to whether penalty is proposed for alleged concealment of income OR furnishing of inaccurate particulars of such income , the penalty levied is hereby obliterated. - Decided in favour of assessee.

Summary

Issues:
1. Recording satisfaction of concealment or inaccurate particulars of income for penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appeal before the Appellate Tribunal ITAT Dehradun pertained to the Revenue challenging the order of the ld. CIT(A), Dehradun dated 28.04.2017. The primary issue revolved around the recording of satisfaction for initiating penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. The AO had disallowed certain claims made by the assessee and mentioned in the assessment order about initiating penalty proceedings for concealment or furnishing inaccurate particulars of income. However, the specific limb invoked for the penalty was not clearly mentioned, leading to ambiguity. The penalty order later imposed by the ITO mentioned "concealment of income/furnishing of inaccurate particulars of income."

In addressing this issue, the Tribunal referred to various judgments for guidance. The Karnataka High Court in CIT vs. Manjunatha Cotton and Ginning Factory held that the notice under section 274 must specifically state the grounds mentioned in section 271(1)(c) of the Act to satisfy the legal requirement. Similarly, the Bombay High Court emphasized in Mr. Mohd. Farhan A. Shaikh Vs ACIT that the assessee must be informed of the grounds of penalty proceedings through a statutory notice without any vagueness. The Delhi High Court in PCIT vs. Sahara India Life Insurance Co. Ltd. reiterated the importance of specifying the grounds for imposing penalties to ensure the assessee knows the exact charges to be addressed.

Based on these principles, the Tribunal concluded that since the AO did not specify whether the penalty was proposed for concealment of income or furnishing inaccurate particulars of income under section 274, the penalty levied lacked clarity and was therefore annulled. Consequently, the appeal of the Revenue was dismissed, upholding the decision to obliterate the penalty due to the lack of specificity in the grounds for imposing it.

In summary, the judgment focused on the importance of clearly stating the grounds for penalty proceedings to avoid ambiguity and ensure the assessee is fully aware of the charges against them. The decision was made in line with the legal precedents emphasizing the need for specificity in notices related to penalty imposition under the Income Tax Act, 1961.