2024 (7) TMI 36 - AT - Income Tax

Penalty u/s 271(1)(c) v/s 271(1B) - additions towards estimated income arising from share trading transactions - assessment order that while making additions towards estimated share trading income, the assessee has formed satisfaction u/s 271(1B) holding that the assessee has furnished inaccurate particulars of income towards such additions - as argued penalty has been imposed on a different premise than the original satisfaction derived for imposition of penalty - HELD THAT - The ground for initiation of action by the AO under Section 271(1)(c) was allegation of furnishing of inaccurate particulars of income . This ground has been substituted by the AO himself while passing the penalty order. Thus, in the absence of continuity of the satisfaction of the AO, the penalty order passed by the AO is liable to struck down on this ground alone. We usefully refer to the decision of New Sorathia Engineering Company 2006 (1) TMI 71 - GUJARAT HIGH COURT and CIT vs. Manu Engineering Works 1978 (9) TMI 18 - GUJARAT HIGH COURT Similar view has been taken by the Co-ordinate Bench of the Tribunal in Gian Chand Batia 1996 (11) TMI 97 - ITAT ALLAHABAD-B Therefore, where the AO is not sure about the nature of default and has confirmed the penalty on an altogether different ground than for which satisfaction under Section 271(1B) was formed, the penal action under Section 271(1)(c) of the Act is not sustainable in law. Appeal of the assessee is allowed.

Summary

The ITAT Delhi allowed the appeal filed by the assessee against the penalty imposed under Section 271(1)(c) of the Income Tax Act for A.Y. 2014-15. The penalty was set aside as the AO altered the basis for imposition of penalty, rendering it unsustainable in law. The appeal was allowed, and the penalty was cancelled. (Case: Appellate Tribunal ITAT DELHI, Citation: 2024 (7) TMI 36 - ITAT DELHI)