2024 (7) TMI 40 - AT - Income Tax

Penalty u/s 271(1)(c) - furnishing of inaccurate particulars of income - Additions made by the AO have been deleted in quantum appeal - HELD THAT - In view of the above admitted factual position, since the additions made by the AO have been deleted in quantum proceedings, the very base for initiation of penalty proceedings u/s 271(1)(c) of the Act, has gone. Therefore, the impugned penalty levied u/s 271(1)(c) of the Act has no legs to stand in the eye of law and the same is hereby deleted. Grounds are allowed.

Summary

Issues:
1. Appeal against sustaining penalty under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2011-12.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income-tax (Appeals) sustaining a penalty of Rs. 18,80,120 levied by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2011-12. The grounds of appeal raised by the assessee challenged various aspects of the penalty order, including the legality of the order, the alleged furnishing of inaccurate particulars of income, and the procedural aspects of the penalty proceedings.

The primary contention of the assessee was that the penalty order was unsustainable as it was based on the reasoning contained in the quantum assessment order, without providing independent reasoning for the imposition of the penalty. The assessee argued that penalty proceedings and quantum proceedings are distinct and independent, necessitating separate justifications for the penalty imposition.

Furthermore, the assessee challenged the ambiguity in the notice issued under section 271(1)(c), claiming that it did not specify the alleged offense clearly, thus violating principles of natural justice by denying a fair opportunity to defend the case. The assessee also argued that the penalty order was passed without proper application of mind, ignoring the submissions made during the proceedings.

During the hearing, it was highlighted that in the quantum appeal, the ITAT Delhi Bench had allowed the assessee's appeal and dismissed the Revenue's appeal, resulting in the deletion of the additions made by the Assessing Officer. Consequently, as the basis for initiating the penalty proceedings ceased to exist due to the deletion of the additions in the quantum proceedings, the Tribunal concluded that the penalty levied under section 271(1)(c) had no legal standing. Therefore, the Tribunal allowed the appeal of the assessee, and the impugned penalty was deleted.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that the penalty imposed under section 271(1)(c) was unsustainable after the additions made by the Assessing Officer were deleted in the quantum proceedings. The judgment highlighted the importance of independent reasoning in penalty proceedings and the necessity for a clear specification of alleged offenses in penalty notices to uphold principles of natural justice.