2018 (7) TMI 2366 - AT - Income Tax

Penalty u/s 271(1)(c) - allegation of change in the basis of initiation of penalty proceedings - HELD THAT - A bare perusal of the assessment order passed u/s 143(3) dated 05.12.2013 shows that a satisfaction as contemplated u/s 271(1)(c) of the Act r.w.s. 271(1B) has formed towards concealment of particulars of income in respect of long term capital gains arising on sale of certain immovable property. A perusal of the penalty order passed u/s 271(1)(c) of the Act shows that the AO has shifted from its original satisfaction and imposed penalty for default committed on account of filing inaccurate particulars of income with reference to long term capital gains. Therefore there is a definite change in the basis of initiation of penalty proceedings and imposition thereof which is not permissible in law. The issue is squarely covered in favour of the assessee by the decision of the co-ordinate bench in in Shri Kantibhai Naranbhai Prajapati 2018 (2) TMI 1823 - ITAT AHMEDABAD as held i n the absence of continuity in the findings of the AO and the CIT(A) the order of the penalty passed by the AO is liable to be struck down on this ground alone. Decided in favour of assessee.

Summary

The Appellate Tribunal considered the appeal filed by the Revenue against the penalty order issued by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2011-12. The Revenue challenged the deletion of the penalty of Rs.14,60,034/- by the CIT(A). The AO had initially imposed the penalty based on concealment of income related to long term capital gains, but later shifted the basis to inaccurate particulars of income. The Tribunal noted that this change in the basis of penalty imposition was not permissible in law. The Tribunal cited a previous decision where it was held that altering the original basis for penalty imposition by the appellate authority renders the penalty unsustainable. The Tribunal concluded that since the penalty was deleted on legal grounds, there was no need to address other arguments raised by the assessee. Consequently, the appeal of the Revenue was dismissed.The key issue considered by the Tribunal was the shift in the basis of penalty imposition by the AO from concealment of income to inaccurate particulars of income. The Tribunal found this change impermissible in law and cited precedent to support its decision to dismiss the Revenue's appeal. The Tribunal emphasized the importance of continuity in the findings of the AO and the appellate authority when imposing penalties under section 271(1)(c) of the Act.The Tribunal's decision was based on the principle that the imposition of penalty is solely dependent on the satisfaction of the AO and cannot be altered by the appellate authority. The Tribunal's interpretation of the law led to the conclusion that the penalty imposed by the AO was not sustainable due to the change in the basis of penalty imposition. By referencing relevant case law and legal principles, the Tribunal established that the penalty order was liable to be struck down on the ground of alteration of the original basis for penalty imposition.In conclusion, the Tribunal upheld the decision of the CIT(A) to delete the penalty imposed by the AO. The Tribunal's analysis focused on the legal grounds for penalty imposition and the impermissibility of changing the basis for penalty imposition during the appellate process. The Tribunal's decision provides clarity on the requirements for imposing penalties under section 271(1)(c) of the Income Tax Act, ensuring consistency and adherence to legal principles in penalty proceedings.