2018 (12) TMI 1554 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - Non specification of charge - Held that - Assessing Officer while initiating penalty proceedings has merely mentioned, penalty proceedings u/s. 274 r.w.s. 271(1)(c) are separately initiated . The manner in which satisfaction has been recorded and thereafter, penalty has been levied clearly shows that there was ambiguity in the mind of Assessing Officer with respect to charge for which penalty u/s. 271(1)(c) is to be levied. While recording satisfaction the Assessing Officer has omitted to mention charge for levy of penalty. In the case of Commissioner of Income Tax Vs. Manjunatha Cotton & Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT has held that the assessee should know the grounds which he has to meet specifically. Otherwise, the principle of natural justice is offended. On the basis of such proceedings, no penalty could be imposed on the assessee. Thus, where the Assessing Officer has failed to mention the charge at the time of recording of satisfaction for initiating penalty u/s. 271(1)(c) the penalty proceedings are liable to be quashed - Decided in favour of assessee.

Summary

Issues: Appeal against the order confirming penalty u/s. 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2006-07.

Analysis:

1. Failure to Appear and Written Submissions:
The appellant failed to appear despite notice, but filed written submissions. The submissions outlined the appellant's income disclosure, search action, and response to notice u/s. 153C. The appellant argued that the penalty was unjustified as the additional income was self-disclosed without any query by the Revenue, and there was no specific charge mentioned in the assessment order or penalty notice.

2. Ambiguity in Penalty Charge:
The Assessing Officer initiated penalty proceedings without specifying whether it was for concealing income or furnishing inaccurate particulars. The penalty order mentioned both charges, leading to ambiguity. The penalty was imposed based on the charge of concealing income, but the omission of a specific charge at the initiation stage was deemed a violation of natural justice principles. Citing the Karnataka High Court's ruling, the tribunal held that the appellant should have been aware of the exact grounds for penalty imposition.

3. Quashing of Penalty Proceedings:
Due to the lack of clarity in the penalty charge at the initiation stage, the tribunal ruled in favor of the appellant and allowed the appeal. The Assessing Officer's failure to specify the charge at the beginning of penalty proceedings rendered the penalty unsustainable. Therefore, the penalty levied u/s. 271(1)(c) was annulled based on the ambiguity and violation of natural justice principles.

In conclusion, the tribunal set aside the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2006-07, emphasizing the importance of clearly specifying the charge for penalty imposition from the initiation stage to ensure fairness and adherence to natural justice principles.