2018 (10) TMI 2042 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - as alleged AO has failed to strike out one of the twin charges of concealment of income or furnishing of inaccurate particulars of income - HELD THAT - At the time of confirmation of the penalty levied, CIT (A) was also not sure whether the penalty is correctly levied by the learned AO for furnishing of inaccurate particulars of income or concealment of income . There was no clear-cut charge put on the assessee at the time of initiation of penalty. Further, at the time of recording satisfaction in the assessment order, the AO recorded the satisfaction for concealment of income, however, levied the penalty on furnishing of inaccurate particulars. As relying on cases Manjunath cotton and ginning factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT , Munir Naga ready 2016 (10) TMI 599 - KARNATAKA HIGH COURT , S Chandrasekhar 2017 (2) TMI 1127 - KARNATAKA HIGH COURT , Samson Perincherry 2017 (1) TMI 1292 - BOMBAY HIGH COURT Penalty levied by the learned AO u/s 271 (1) (c) of the act is not sustainable. Accordingly, Ground of the appeal of the assessee is allowed.

Summary

Issues Involved:

1. Non-consideration of a specific ground of appeal by the coordinate bench.
2. Non-consideration of binding judicial precedents cited by the assessee.
3. Adequacy of opportunity provided to the appellant during penalty proceedings.
4. Specificity of charges in penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Non-consideration of a Specific Ground of Appeal:

The assessee filed a Miscellaneous Application under Section 254(2) of the Income Tax Act, 1961, seeking rectification of an apparent mistake in a prior order. The assessee contended that the coordinate bench failed to consider ground number four from the appeal memo, which challenged the adequacy of opportunity given during penalty proceedings and the absence of any act of concealment of income or furnishing inaccurate particulars. The tribunal acknowledged that this ground was indeed reproduced but not addressed in the order, constituting an error apparent on the record. Consequently, the tribunal recalled the order for fresh adjudication on this ground.

2. Non-consideration of Binding Judicial Precedents:

The assessee argued that the coordinate bench did not consider decisions from the Supreme Court and the Karnataka High Court, which were cited during the appeal proceedings. These decisions were pertinent to the issue at hand and favored the assessee. The tribunal recognized this oversight as a mistake apparent from the record, as non-consideration of binding precedents is rectifiable under Section 254(2). This further justified the recall of the order for reconsideration of the ignored ground.

3. Adequacy of Opportunity Provided to the Appellant:

The assessee claimed that the penalty proceedings were conducted in undue haste without providing a proper opportunity to examine transactions and confirmations. The tribunal noted this assertion in the recalled appeal and considered it crucial for determining the validity of the penalty. The tribunal emphasized the necessity of a clear-cut satisfaction recorded by the Assessing Officer (AO) regarding concealment or furnishing of inaccurate particulars, which was allegedly lacking in this case.

4. Specificity of Charges in Penalty Proceedings:

The tribunal examined the specificity of charges in the penalty proceedings under Section 271(1)(c). The assessee argued that the notice issued under Section 274 did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, as both charges were mentioned without striking off one. The tribunal observed that the AO initiated penalty proceedings for concealment but levied the penalty for furnishing inaccurate particulars, leading to ambiguity. Citing decisions from the Karnataka and Bombay High Courts, the tribunal held that the absence of a specific charge rendered the penalty unsustainable. Consequently, the tribunal directed the cancellation of the penalty of Rs. 16.83 lakhs levied for the assessment year 2006-07.

In conclusion, the tribunal addressed the procedural lapses and lack of specificity in the penalty proceedings, ultimately ruling in favor of the assessee and allowing the appeal.