2018 (1) TMI 1238 - AT - Income Tax

Penalty levied u/s 271(1)(c) OR u/s 271AAA - notice is not issued in the proforma - Held that - We have perused the notice u/s 271(1)(c) of the Act and find that the notice is not issued in the proforma, but is issued both for concealment as well as furnishing of inaccurate particulars of income. We find that the AO was satisfied about the existence of both the ingredients and therefore, there is no need to strike off any portion of the notice. Therefore, the assessee s appeals for the A.Ys 2007-08 & 2008-09 are without any merits and are thus dismissed. The copy of the notice u/s 271AAA has not been produced before us, whereas the assessee has filed the copy of the notice u/s 271(1)(c) of the Act for the A.Y 2009-10 as well. As rightly pointed out by the learned Counsel for the assessee, the AO has to issue a notice for penalty u/s 271AAA separately and cannot suo moto treat convert the notice issued u/s 271(1)(c) to a penalty notice u/s 271AAA. Therefore, we admit the additional ground, which is a legal ground and allow the same. The penalty order for A.Y 2009- 10 is accordingly set aside and the other grounds of appeal on the merits of the penalty order are not adjudicated.

Issues Involved:
1. Penalty levied under Section 271(1)(c) for A.Ys 2007-08 and 2008-09.
2. Penalty levied under Section 271AAA for A.Y 2009-10.
3. Validity of notice under Section 271(1)(c).
4. Applicability of case laws on protective assessments and penalties.
5. Additional grounds of appeal regarding improper notice and jurisdiction.

Issue-Wise Detailed Analysis:

1. Penalty levied under Section 271(1)(c) for A.Ys 2007-08 and 2008-09:
The assessee challenged the penalty levied under Section 271(1)(c) of the Income Tax Act for A.Ys 2007-08 and 2008-09. The Assessing Officer (AO) initiated penalty proceedings based on receipts found during a search operation, which were treated as unaccounted income. The CIT (A) confirmed the substantive addition in the assessee’s hands, leading to the penalty. The Tribunal upheld the CIT (A)'s decision, noting that the substantive addition had become final as the assessee did not appeal against it.

2. Penalty levied under Section 271AAA for A.Y 2009-10:
For A.Y 2009-10, the penalty was levied under Section 271AAA. The assessee argued that the notice for penalty under Section 271(1)(c) was issued, but the penalty was levied under Section 271AAA without issuing a separate notice. The Tribunal agreed with the assessee, stating that separate notices are required for penalties under different sections. Therefore, the penalty order for A.Y 2009-10 was set aside.

3. Validity of notice under Section 271(1)(c):
The assessee contended that the notice under Section 271(1)(c) was invalid as the AO did not strike off inappropriate words, making it unclear whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal found that the notice was issued for both defaults, and since both conditions were present, there was no need to strike off any part of the notice. Thus, the notice was deemed valid.

4. Applicability of case laws on protective assessments and penalties:
The assessee relied on various case laws to argue that penalties cannot be initiated on protective assessments. The Tribunal distinguished these cases, noting that in the present case, the substantive addition was confirmed in the assessee's hands, making the protective assessment irrelevant. The Tribunal cited several judgments, including those from the Calcutta High Court and Gujarat High Court, to support its decision that penalties can be levied when the substantive addition is confirmed.

5. Additional grounds of appeal regarding improper notice and jurisdiction:
The assessee raised additional grounds that the notice under Section 271(1)(c) was improper and that the AO lacked jurisdiction. The Tribunal examined the notice and found it valid, as it was issued for both concealment and furnishing inaccurate particulars. The Tribunal also noted that the AO was satisfied about the defaults during the assessment proceedings, justifying the initiation of penalty proceedings.

Conclusion:
The Tribunal dismissed the appeals for A.Ys 2007-08 and 2008-09, upholding the penalties under Section 271(1)(c). For A.Y 2009-10, the Tribunal set aside the penalty under Section 271AAA due to the lack of a separate notice. The decision emphasized the importance of proper notice and the distinction between protective and substantive assessments in penalty proceedings. The order was pronounced in open court on 25th January 2018.

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