2018 (5) TMI 1728 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - non specification of charge - Held that - AO has not explicitly specified in the penalty notice as to whether penalty proceedings are being initiated for furnishing of inaccurate particulars or concealment of income - therefore, penalty order passed by the AO is liable to be cancelled - Decided in favor of assessee.

Summary

Issues involved: Appeal against deletion of penalty under section 271(1)(c) for assessment year 2009-2010.

Analysis:
1. Issue of penalty deletion: The primary issue in this case is the deletion of the penalty of ?53,28,163 under section 271(1)(c) by the CIT(A). The Assessing Officer had initiated the penalty based on the appellant's disclosure of ?20,00,000 in compliance with a notice issued under section 153A of the Act. The CIT(A) observed discrepancies in the penalty initiation process, highlighting that the AO did not conclusively establish how the disclosed income amounted to concealment or inaccurate particulars as per Explanation 5A of section 271(1)(c). The appellant argued against the applicability of Explanation 5 and pointed out deficiencies in the notice issued under section 271(1)(c). The CIT(A) referred to legal provisions and court decisions to support the appellant's contentions, ultimately ruling in favor of the appellant and deleting the penalty.

2. Defects in notice and legal precedents: The appellant raised concerns regarding the defects in the notice issued under section 271(1)(c) and cited legal precedents, including the Supreme Court's decision in the case of M/s Agarwal Rolling Mills Ltd, to support their argument against the penalty imposition. The CIT(A) analyzed the legal provisions and court decisions to conclude that the penalty levied under section 271(1)(c) was not sustainable due to the lack of conclusive findings by the AO and the deficiencies in the penalty notice. The CIT(A) highlighted the importance of explicitly specifying the grounds for penalty initiation in the notice, as per legal requirements and judicial interpretations.

3. Confirmation of CIT(A) order: The Appellate Tribunal upheld the CIT(A)'s decision to delete the penalty, citing the Supreme Court's judgment in the case of M/s. SSA's Emerald Meadows and the importance of explicitly specifying the grounds for penalty initiation in the notice. The Tribunal dismissed the revenue's appeal, emphasizing the legal requirement for clarity in penalty notices and the need for conclusive findings to support penalty imposition. The Tribunal's decision reaffirmed the significance of adhering to legal provisions and judicial interpretations in penalty proceedings under section 271(1)(c) of the Income Tax Act.

In conclusion, the Appellate Tribunal dismissed the revenue's appeal against the deletion of the penalty under section 271(1)(c) for the assessment year 2009-2010, emphasizing the importance of legal compliance, conclusive findings, and clarity in penalty notices as per the provisions of the Income Tax Act and relevant judicial precedents.