2024 (7) TMI 962 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice - as argued non specific charge of furnishing incorrect particulars of income - HELD THAT - AO has consciously deleted all irrelevant and unrelated part of the show cause notice and only the charge of furnishing inaccurate particulars of income was mentioned in the show cause notice. Thus, it is a case of initiation of penalty proceedings against a specific charge of furnishing inaccurate particulars of income which in our view is a correct charge for initiation of penalty u/s 271(1)(c). Accordingly there is no defect either in recording of satisfaction or in issuing the show cause notice u/s 274 r.w.s. 271(1)(c) of the Act for initiating the penalty proceedings u/s 271(1)(c). Once the penalty proceedings were initiated on a definite charge and was made known to the assessee by both means of recording the satisfaction in the assessment order as well as serving the show cause notice then the objection of the assessee has no legs to stand. Accordingly we do not find any substance in this objection of the assessee. Levy of penalty u/s 271(1)(c) is proper and justified as it is a case of furnishing of incorrect particulars of income by making a claim of business loss as against the speculative loss not permissible under the provisions of the Act. Hence we do not find any reason to interfere with the impugned order of the CIT(A) confirming the levy of penalty u/s 271(1)(c) of the Act. Appeal of the assessee is dismissed.

Summary

Issues:
- Confirmation of penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2014-15.
- Validity of initiation of penalty proceedings and consequential order.

Analysis:

Issue 1: Confirmation of penalty under section 271(1)(c)
The case involved an appeal against the penalty order passed under section 271(1)(c) of the Income Tax Act for Assessment Year 2014-15. The assessee, a private Limited Company, had claimed a business loss of Rs. 44,57,310/- from transactions on the National Multi Commodity Exchange of India (MCX), which the Assessing Officer treated as impermissible speculative loss. The Assessing Officer initiated penalty proceedings and levied a penalty of Rs. 39,18,000/-, being 100% of the tax sought to be evaded. The assessee contended that the claim was bona fide and that the subsequent withdrawal of the claim before the show cause notice was issued indicated no concealment of income. The assessee also argued that the penalty was based on furnishing incorrect particulars of income, not concealment. However, the Tribunal found that the claim of speculative loss as business loss was impermissible and amounted to furnishing incorrect particulars of income. The Tribunal upheld the penalty, stating that the claim was not made in error but consciously, and therefore, the penalty under section 271(1)(c) was justified.

Issue 2: Validity of initiation of penalty proceedings
The assessee raised objections regarding the validity of the initiation of penalty proceedings and the consequential order. The Assessing Officer had recorded satisfaction in the assessment order and issued a show cause notice specifically mentioning the charge of furnishing inaccurate particulars of income. The Tribunal found that the initiation of penalty proceedings was based on a specific charge of furnishing inaccurate particulars of income, which was a correct charge for initiating penalty proceedings under section 271(1)(c) of the Act. The Tribunal concluded that there was no defect in recording satisfaction or issuing the show cause notice, and the objection raised by the assessee was dismissed. Therefore, the Tribunal upheld the validity of the initiation of penalty proceedings and the consequential order.

In conclusion, the Tribunal dismissed the appeal of the assessee, confirming the penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2014-15. The Tribunal found that the claim of speculative loss as business loss was impermissible and amounted to furnishing incorrect particulars of income. Additionally, the Tribunal upheld the validity of the initiation of penalty proceedings and the consequential order, stating that the charge of furnishing inaccurate particulars of income was correctly applied.