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2023 (4) TMI 398 - HC - Income TaxPenalty u/s 271(1)(c) - Defective notice u/s 274 - satisfaction of existence of ground under Section 271(1)(c) - assessee failed to disclose income under the head Income from Other Sources in the return of income filed - HELD THAT - A combined reading of the authorities in Dilip Shroff 2007 (5) TMI 198 - SUPREME COURT and Manjunatha Cotton Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT leads us to an inference that the satisfaction of existence of ground u/s 271(1)(c) is the sine qua non for initiation of proceedings and the penalty proceedings should be confined only to those grounds specifically stated in the notice. As recorded hereinabove, AO had issued notice only with regard to furnishing in accurate particulars. Whereas the satisfaction recorded is with regard to concealment of income particulars and the very ground has been struck-off. The notice has been issued on the specific premise that assessee had furnished inaccurate particulars of income. We are of the view that the penalty order is not sustainable in law. Decided in favour of assessee.
Issues involved:
The judgment involves the following Issues: 1. Whether the penalty levied in the penalty proceedings should be quashed due to vagueness, conflicting reasons, and lack of application of mind? 2. Whether Explanation 1 to section 271(1)(c) is applicable to the case? 3. Whether the penalty under section 271(1B) should be quashed as the provisions are not satisfied? 4. Whether the penalty should be quashed as the addition arose from a valuation exercise and was not challenged by the appellant? Issue 1: The appeal was directed against a penalty order passed by the ITAT. The Assessing Officer had initiated penalty proceedings under Section 271(i)(c) of the Income Tax Act, 1961. The appellant challenged the penalty, arguing that the notice issued was contrary to the satisfaction of the Assessing Officer. The appellant contended that the penalty proceedings were based on concealment of income, while the notice mentioned inaccurate particulars of income. The court referred to relevant case laws and held that the penalty order was not sustainable in law due to the discrepancy between the grounds for initiation and the actual penalty imposed. Issue 2: The court considered the arguments presented by both parties regarding the initiation of penalty proceedings. The appellant's representative argued that the penalty order was not in accordance with the satisfaction recorded by the Assessing Officer. The court analyzed the assessment order and the notice issued, noting the discrepancy between the grounds for penalty initiation and the actual basis for the penalty. Relying on legal precedents, the court concluded that the penalty order was not valid as it did not align with the grounds specified in the notice. Issue 3: The court examined the facts of the case where the Assessing Officer had imposed a penalty under Section 271(i)(c) for concealing true income particulars. The appellant contended that the penalty proceedings were initiated based on inaccurate particulars of income, not concealment. The court referenced relevant legal authorities and highlighted the importance of aligning the grounds for penalty initiation with the actual penalty imposed. Based on this analysis, the court found that the penalty order was not sustainable in law and ruled in favor of the appellant. Issue 4: The court reviewed the penalty order issued by the Assessing Officer and the subsequent challenge by the appellant. The appellant argued that the penalty was not valid as it was based on concealment of income, while the notice mentioned inaccurate particulars of income. The court considered the arguments presented by both parties and referred to legal precedents to determine the validity of the penalty order. Ultimately, the court held that the penalty order was not sustainable in law due to the discrepancy between the grounds for initiation and the actual penalty imposed. This summary provides a detailed breakdown of the judgment for each issue involved, highlighting the arguments presented by the parties and the court's analysis based on legal principles and precedents.
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