2015 (9) TMI 1169 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Held that - The assessing officer issued the penalty notice without specifying the charge under which the notice was issued. Before us, the Ld D.R could not distinguish the above said decision. Hence, on this legal ground also, the assessee s appeal is required to be allowed. In view of the foregoing discussions, we set aside the orders passed by Ld CIT(A) for both the years under consideration and direct the assessing officer to delete the penalty levied u/s 271(1)(c) of the Act in both the years. - Decided in favour of assessee.

Issues Involved:
Penalty under section 271(1)(c) of the Income Tax Act for assessment years 2007-08 and 2008-09.

Detailed Analysis:

Issue 1: Confirmation of Penalty by CIT(A)
The appellant contested the penalty levied under section 271(1)(c) by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The penalty was imposed due to the appellant surrendering commission expenses during a search operation. The appellant argued that the commission payments were genuine, made through cheques, with tax deductions and service tax payments. The AO believed the surrender indicated malafide intentions to conceal income, leading to the penalty.

Issue 2: Surrender of Commission Expenses
During the search operation, the appellant surrendered commission expenses paid to two parties, claiming they were for genuine business purposes. The appellant highlighted that the payments were made as per requests from individuals who facilitated contract works. The appellant emphasized not receiving any cash against the cheques, indicating the genuineness of the transactions.

Issue 3: Lack of Opportunity to Contradict Evidence
The appellant expressed his inability to produce individuals related to the commission payments during the search proceedings. The AO did not provide the appellant with copies of statements or reports relied upon, denying the appellant the chance to contest the evidence used against him. The Tribunal found that the surrender of commission expenses did not automatically imply malafides, especially when the appellant was not given the opportunity to refute the evidence.

Issue 4: Explanation and Bonafide Intent
The Tribunal analyzed the explanation provided by the appellant under Explanation 1 to section 271 of the Act. The appellant consistently maintained the genuineness of the payments, supported by the method of payment and tax compliance. The Tribunal concluded that the appellant's explanation was not proven false, and the AO's suspicions did not establish lack of bonafide intent.

Issue 5: Clarity in Penalty Notice
The appellant argued that the penalty notice did not specify whether it was for concealment of income or furnishing inaccurate particulars. Citing legal precedent, the Tribunal agreed that clarity in the charge is essential for a valid penalty. As the AO failed to specify the charge clearly, the Tribunal ruled in favor of the appellant on technical grounds.

Conclusion
The Tribunal set aside the CIT(A)'s orders and directed the AO to delete the penalty imposed under section 271(1)(c) for both assessment years. The Tribunal's decision was based on the lack of opportunity for the appellant to contest the evidence, the genuine nature of the commission payments, and the ambiguity in the penalty notice.

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