2024 (10) TMI 171 - AT - Income Tax

Penalty u/s 271(1)(c) - order of ITSC, withdrawing immunity from levy of penalty and prosecution relied upon - Parallel proceedings - As argued non-recording the satisfaction as to how the assessee has concealed the income or has furnished the inaccurate particulars of income - HELD THAT - Parallel working is going on i.e. on one hand assessee was asked to deposit the amount as per the order of ld. ITSC dated 31st December, 2015, to which assessee deposited almost 60% of the tax settlement amount and paid the remaining amount as directed by the Hon ble High Court vide writ order and parallelly ld. AO without making reference to the provisions of the Act laying down the procedure prior to visiting the assessee with the penalty, has levied the penalty solely on the basis of order of ld. ITSC, withdrawing immunity from levy of penalty and prosecution. AO has not referred to the assessment proceedings if any, carried out. AO has also not referred to any satisfaction having been recorded during the course of assessment proceedings prior to initiating the penalty proceedings. There is also no reference of any notice issued u/s 274 with respect to 271 of the Act. What is indicated in the said penalty order is that immediately after getting information about withdrawing of immunity from penalty and prosecution by ld. ITSC letters were issued to the assessee on 28th June, 2018, and 5th July, 2018, informing about the withdrawal of immunity from penalty and prosecution to which the assessee filed the reply on 13th July, 2018, stating that a major amount of tax liability has been paid off and some more time is required to deposit the remaining amount. The reply of the assessee is already captured in the penalty order reproduced above. Soon after receiving the reply of the assessee on 13th Jul, 2018, the ld. AO has framed the penalty order on 30th July, 2018, levying the penalty - The complete exercise carried out by the ld. AO levying penalty u/s 271(1)(c) of the Act is arbitrary and not in accordance with the law. Thus assessee deserves to succeed as the penalty proceedings have not been initiated in accordance with law and they are void ab initio. Levy of penalty u/s 271AAA - We find that in the penalty order u/s 271AAA of the Act, the ld. AO has not referred to any conditions prescribed u/s 271AAA of the Act nor there is any mentioned of any statement recorded u/s 132(4) of the Act nor is there any mention about the assessee having being asked to explain the manner of earning undisclosed income. Therefore, when the conditions prescribed u/s 271AAA of the Act remains to be fulfilled, the initiation of penalty proceedings u/s 271AAA of the Act are itself void, illegal and bad in law and therefore, the penalty proceedings u/s 271AAA for A.Ys. 2011-12 and 2012-13 are hereby quashed and impugned penalty levied u/s 271AAA of the Act are hereby deleted.

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act for A.Ys. 2009-10, 2010-11, 2013-14, and 2014-15.
2. Levy of penalty under Section 271AAA of the Income Tax Act for A.Ys. 2011-12 and 2012-13.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act:

Background:
The assessee challenged the penalty orders issued by the Commissioner of Income-tax (Appeals) [CIT(A)] and the Assessing Officer (AO) for A.Ys. 2009-10, 2010-11, 2013-14, and 2014-15. The penalties were levied under Section 271(1)(c) for concealment of income.

Assessee's Arguments:
- The penalty cannot be levied without recording satisfaction.
- The quantum appeal admitted by higher authority indicates a debatable issue, thus penalty under Section 271(1)(c) cannot be levied.
- The CIT(A) erred in enhancing the penalty without issuing a show-cause notice.

Tribunal's Observations:
- The AO failed to record satisfaction as required under Section 271(1)(c) before levying the penalty.
- The penalty orders did not refer to any assessment proceedings or any notice issued under Section 274.
- The AO's actions were arbitrary and not in accordance with the law.
- The Tribunal cited judgments from the Hon'ble Delhi High Court and Karnataka High Court, emphasizing the necessity of recording satisfaction before initiating penalty proceedings.

Conclusion:
The penalty orders under Section 271(1)(c) for A.Ys. 2009-10, 2010-11, 2013-14, and 2014-15 were quashed, and the penalties were deleted.

2. Levy of Penalty under Section 271AAA of the Income Tax Act:

Background:
The assessee challenged the penalty orders issued by the CIT(A) and AO for A.Ys. 2011-12 and 2012-13. The penalties were levied under Section 271AAA for undisclosed income.

Assessee's Arguments:
- No statement was recorded during the search under Section 132(4), which is a prerequisite for invoking Section 271AAA.
- An affidavit from the director of the assessee company was submitted, confirming no statement was recorded.

Tribunal's Observations:
- The AO did not discuss the conditions under Section 271AAA in the penalty orders.
- The AO failed to issue a show-cause notice before passing the penalty order.
- The conditions for invoking Section 271AAA, such as recording a statement under Section 132(4) and specifying the manner of undisclosed income, were not fulfilled.
- The Tribunal cited judgments from the Hon'ble Delhi High Court, emphasizing the necessity of specific queries and conditions before levying penalties under Section 271AAA.

Conclusion:
The penalty orders under Section 271AAA for A.Ys. 2011-12 and 2012-13 were quashed, and the penalties were deleted.

Final Judgment:
The Tribunal allowed all the appeals for A.Ys. 2009-10 to 2014-15, quashing the penalty orders under Sections 271(1)(c) and 271AAA, and deleted the penalties levied. The order was pronounced in the open court on 30.09.2024.