2022 (6) TMI 233 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - difference between concealment of income OR furnishing of inaccurate particulars of income - argument of non specifying the nature of default i.e. whether there is concealment of income or furnishing of inaccurate particulars of income - failure to strike off the irrelevant default - HELD THAT - Admittedly, it is a matter of fact borne from record that the A.O in the SCN dated 29.06.2016 that was issued a/w the assessment order had while initiating the penalty proceedings u/s. 271(1)(c) of the Act, failed to strike off the irrelevant default i.e. concealment of income OR furnishing of inaccurate particulars of income for which the impugned penalty proceedings had been initiated by him. But then, we find that A.O had vide another SCN dated 23.11.2016 called upon the assessee to show cause as to why penalty u/s.271(1)(c) may not be imposed on him. However, as the contents of the aforesaid SCN dated 23.11.2016 are neither discernible from the records nor brought to our notice us by the Ld. Authorized Representative (for short AR ) for the assessee, therefore, in absence of complete facts/records before us, we are unable to concur with the Ld. AR that as the A.O had while initiating penalty proceedings failed to strike off the relevant default in the body of the SCN , therefore, he had invalidly assumed jurisdiction and imposed penalty on the assessee. as both the defaults i.e. concealment of income and furnishing of inaccurate particulars of income are separate and distinct default which operates in their exclusive fields, therefore, imposition of penalty by the A.O qua the aforesaid solitary addition for both of the aforesaid defaults contemplated in Section 271(1)(c) of the Act cannot not be sustained and is liable to be struck down on the said count itself. We find that the fine distinction between the said two defaults contemplated in Sec. 271(1)(c), viz. concealment of income and furnishing of inaccurate particulars of income had been appreciated at length by the Hon ble Supreme Court in its judgments passed in the case of Dilip Shroff Vs. Jt. CIT 2007 (5) TMI 198 - SUPREME COURT and T ASHOK PAI 2007 (5) TMI 199 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues:
1. Imposition of penalty under Sec. 271(1)(c) of the Income-tax Act, 1961.
2. Validity of penalty order based on show cause notice.
3. Distinction between 'concealment of income' and 'furnishing of inaccurate particulars of income'.

Issue 1: Imposition of penalty under Sec. 271(1)(c) of the Income-tax Act, 1961:
The appeals filed by the assessee were against the orders passed by the CIT(Appeals)-II, Raipur, arising from the orders passed by the A.O under Sec. 271(1)(c) of the Income-tax Act for the assessment years 2013-14 & 2014-15. The AO imposed a penalty on the assessee for 'concealment of income' and 'furnishing of inaccurate particulars of income'. The Tribunal noted that these defaults are distinct and separate, as explained by the Supreme Court in previous judgments. The AO's imposition of a single penalty for both defaults was deemed unsustainable. The Tribunal set aside the penalty imposed by the AO, quashing it in both assessment years.

Issue 2: Validity of penalty order based on show cause notice:
The AO initiated penalty proceedings based on a Show Cause Notice (SCN) for 'concealment of income' and 'furnishing of inaccurate particulars of income'. The assessee argued that the AO failed to specify the default in the SCN, thus invalidating the penalty. However, the Tribunal found that a subsequent SCN clarified the defaults and provided the assessee with an opportunity to respond. As the second SCN's contents were not available, the Tribunal could not conclude that the AO lacked jurisdiction due to the initial SCN's deficiencies. Ultimately, the Tribunal focused on the substantive issue of the penalty imposition rather than procedural irregularities in the SCN.

Issue 3: Distinction between 'concealment of income' and 'furnishing of inaccurate particulars of income':
The Tribunal emphasized the difference between 'concealment of income' and 'furnishing of inaccurate particulars of income' as recognized by the Supreme Court in past cases. Given this distinction, the Tribunal found fault with the AO's decision to impose a single penalty for both defaults. The Tribunal held that since the AO initiated penalty proceedings specifically for 'concealment of income', penalizing the assessee for both defaults was unwarranted. This analysis led to the Tribunal setting aside the penalties imposed by the AO for both assessment years.

In conclusion, the Appellate Tribunal ITAT Raipur allowed the appeals of the assessee for the assessment years 2013-14 and 2014-15, quashing the penalties imposed under Sec. 271(1)(c) by the AO. The Tribunal's decision was based on the legal distinction between 'concealment of income' and 'furnishing of inaccurate particulars of income', emphasizing the need for separate penalties for each default.