2022 (7) TMI 112 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - mandation of mentioning correct limb for leveying penalty - HELD THAT - It is well-settled law on the subject as held by various Courts and Tribunals that Section 271(1)(c) penalty order is not sustainable if AO has not mentioned the specific charge in respect of which i.e. whether the penalty is being levied for concealment of income or for furnishing inaccurate particulars of income , which are distinct and separate offences. The Supreme Court in the case of CIT v. SSA'S Emerald Meadows 2016 (8) TMI 1145 - SC ORDER held that where Tribunal, relying on a decision of Karnataka High Court, allowed appeal of assessee holding that notice issued under section 274 read with section 271(1)(c) was bad in law, as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated and High Court, on appeal, held that there was no substantial question of law arising for determination, SLP was to be dismissed. Even on merits, in respect of addition under section 68 of the Act on account of cash deposited in the bank, we note that the AO in the assessment order has made a specific noting that the amount in question was received on 04-04- 2014, which falls outside the purview of this assessment year under consideration. Further, in respect of addition the assessee has submitted that this was an inadvertent mistake in mentioning the incorrect salary figure, which was rectified before the AO during the course of assessment proceedings. It is well-settled proposition that penalty cannot be imposed merely because assessee accepted assessment order levying tax and interest, unless it is discernible from assessment order that addition was on account of concealment (CIT v. Manjunatha Cotton Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT - Therefore, in view of the above facts and the legal position discussed above, we are of the considered view that in the instant set of facts, penalty proceedings are liable to be set aside. Appeal of the assessee is allowed.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act - Specific charge not mentioned in penalty proceedings.

Analysis:

Issue 1: Penalty under section 271(1)(c) - Specific charge not mentioned

The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming a penalty under section 271(1)(c) of the Income Tax Act. The assessee argued that the penalty was not sustainable as the Assessing Officer did not specify whether it was for "concealment of income" or "furnishing inaccurate particulars of income," which are distinct offenses. The Supreme Court and various Tribunals have held that penalty proceedings must clearly state the charge. In this case, the notice initiating penalty did not specify the specific charge, indicating uncertainty on the part of the Assessing Officer. Citing relevant case laws, the Tribunal concluded that penalty proceedings were liable to be set aside due to the absence of a specific charge.

Issue 2: Merits of the Penalty

Regarding the addition under section 68 of the Act for cash deposits in the bank, the Tribunal noted that the amount in question was received outside the assessment year under consideration. Additionally, the addition of ?7000 for salary income was explained as an inadvertent mistake by the assessee, rectified before the Assessing Officer. The Tribunal emphasized that penalty cannot be imposed solely based on accepting the assessment order unless it is evident that the addition was due to concealment. Considering the facts and legal precedents, the Tribunal held that in this case, the penalty proceedings were liable to be set aside.

Conclusion:

The Tribunal allowed the appeal of the assessee, setting aside the penalty under section 271(1)(c) of the Income Tax Act. The decision was based on the lack of a specific charge in the penalty proceedings and the merits of the additions made by the Assessing Officer. The judgment emphasized the importance of clearly specifying the charges in penalty notices and ensuring that penalties are imposed in cases of genuine concealment of income.