2017 (2) TMI 497 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - A perusal of the notice demonstrated that the Assessing Officer has not specified as to which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated, i .e. , whether for concealment of particulars of income or furnishing of inaccurate particulars of income. - Decided in favour of assessee

Summary

Issues:
1. Validity of penalty orders under section 271(1)(c) of the Income Tax Act, 1961.
2. Justification for levy of penalty under section 271(1)(c) of the Act.
3. Legality of penalty on agreed addition.
4. Failure to supply books of account before filing return for AY 2009-10.
5. Compliance with legal provisions in levying penalty.

Analysis:
1. The appeal challenged the order confirming penalty under section 271(1)(c) of the Act. The appellant contended that the penalty orders were void-ab-initio due to lack of specific reasons recorded by the Assessing Officer. The appellant cited the case of Sri Shadi lal Sugar & General Mills Ltd. to support the argument for deletion of penalty.

2. The appellant argued that the levy of penalty was unjustified as they had accepted the addition during assessment proceedings and paid the assessed tax. Citing legal precedent, the appellant claimed that the penalty on the agreed addition was illegal and void.

3. The appellant explained that after survey proceedings, the Assessing Authority failed to supply the books of account before the return filing for AY 2009-10. Due to this delay, the appellant could not calculate concealment initially. However, the impounded documents were later provided during assessment proceedings, enabling the appellant to surrender the amount and pay tax accordingly. The appellant contended that the penalty was unwarranted as they had provided a cogent explanation and the Assessing Officer failed to rebut it.

4. The Assessing Officer initiated penalty proceedings without specifying the limb of section 271(1)(c) under which the penalty was imposed. The appellant relied on a Tribunal judgment and a Karnataka High Court decision emphasizing the need for clear directions and grounds for penalty initiation. The legal principles highlighted included the non-automatic imposition of penalty, the requirement for clear directions, and the importance of distinguishing penalty proceedings from assessment proceedings.

5. The Hon'ble Supreme Court dismissed the Revenue's SLP against a decision quashing penalty due to inadequate specification of penalty proceedings under section 271(1)(c). Citing this precedent, the ITAT Kolkata quashed the penalty levied in the case and allowed the appeal of the assessee, in line with the legal principles established by the Supreme Court and previous judgments.

This detailed analysis reflects the legal arguments, precedents, and principles considered in the judgment by the ITAT Kolkata, leading to the quashing of the penalty levied under section 271(1)(c) of the Income Tax Act, 1961.