2018 (12) TMI 184 - AT - Income Tax

Penalty levied u/s 271(1)(c) - non satisfaction of one of the two limbs of section 271(1)(c) - bogus purchases - Held that - AO holds the assessee to have concealed particulars of its income in the form of bogus purchases and further holds that the assessee has furnished inaccurate particulars of income within meaning of section 271(1)(c) read with Explanation-1 of the Act. Explanation-1 of section 271(1)(c) deals with concealment of income and the Assessing Officer thus, in the present case has held the assessee to have furnished inaccurate particulars of income and also concealed its income. Such an order levying penalty under section 271(1)(c) of the Act on both the limbs of section 271(1)(c) of the Act do not stand and the same is held to be invalid and accordingly, penalty levied under section 271(1)(c) of the Act is deleted. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by Revenue.

Summary

Issues:
- Appeal against order of CIT(A) regarding penalty under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
1. The Revenue appealed against the CIT(A)'s order deleting the penalty under section 271(1)(c) of the Act. Despite the absence of the assessee during the proceedings, the Tribunal proceeded with the appeal after hearing the Departmental Representative for the Revenue.

2. The grounds of appeal raised by the Revenue included contentions regarding the deletion of penalty levied under section 271(1)(c) of the Act. The CIT(A) had deleted the penalty, stating that Explanation-1 of the section cannot be invoked for inaccurate particulars of income, leading to the Revenue's appeal.

3. The main issue in the appeal was the deletion of the penalty under section 271(1)(c) of the Act. The case involved a domestic company engaged in manufacturing and installation of engineering goods. The Assessing Officer disallowed certain expenditures as revenue expenditure and initiated penalty proceedings for concealing income and furnishing inaccurate particulars.

4. The CIT(A) deleted the penalty, and the Tribunal analyzed the penalty provisions under section 271(1)(c) of the Act. It was noted that penalty proceedings should be initiated based on specific grounds, and the Assessing Officer must levy penalty for the identified default. The Tribunal referred to a judgment by the Bombay High Court emphasizing the importance of specifying the grounds for penalty initiation.

5. The Tribunal reviewed the facts of the case and observed that the Assessing Officer had initiated penalty proceedings for inaccurate particulars of income, which was in line with the legal requirements. However, the penalty order levied by the Assessing Officer penalized the assessee for both concealing income and furnishing inaccurate particulars, which was deemed invalid.

6. The Tribunal upheld the CIT(A)'s decision to delete the penalty, concluding that penalizing the assessee on both limbs of section 271(1)(c) was not justified. Consequently, the Revenue's appeal was dismissed, and the penalty under section 271(1)(c) of the Act was deleted.

This detailed analysis of the judgment highlights the key issues, legal provisions, and the Tribunal's reasoning behind dismissing the Revenue's appeal against the deletion of the penalty levied under section 271(1)(c) of the Income-tax Act, 1961.