2019 (1) TMI 961 - HC - Income Tax

Levy of penalty u/s 271(1)(c) - validity of notice - non specification of specific grounds - Concealment of income - Held that - Substantial question of law is covered by the judgment of this Court in the case of THE COMMISSIONER OF INCOME TAX AND ANOTHER Vs. MANJUNATHA COTTON AND GINNING FACTORY 2013 (7) TMI 620 - KARNATAKA HIGH COURT . Following the aforesaid judgment of this Court, the substantial question of law is answered in favour of the assessee

Summary

Issues involved:
1. Requirement of stating reasons for initiating penalty proceedings in the assessment order.
2. Validity of Tribunal's findings on penalty order and method of reckoning additions.
3. Necessity of specific mention by Assessing Officer for valid initiation of penalty proceedings.
4. Rejection of deduction and validity of levying penalty on estimated income.

Analysis:

1. The first issue revolves around the necessity for the Assessing Officer to state reasons and note satisfaction on record in the assessment order for initiating penalty proceedings. The Court considered whether the absence of such actions renders the penalty proceedings unsustainable in law. The re-framed question focused on the sustainability of penalty under Section 271(1)(c) of the Act when the notice under Section 274 does not specify the grounds for initiating penalty proceedings. The Court deliberated on the legal provisions and relevant case law to determine the validity of the penalty imposition.

2. The second issue pertains to the Tribunal's findings on the penalty order and the method used to calculate additions. The Court assessed whether the Tribunal's approval of the Assessing Officer's additions in revised returns and the application of the non-peak credit method were appropriate. The consideration of the materials on record and the evaluation of the Tribunal's decision formed a crucial part of this issue's analysis.

3. The third issue addresses the mandatory requirement for the Assessing Officer to explicitly mention whether the case involves concealment of income or furnishing inaccurate particulars for the valid initiation of penalty proceedings. The Court examined the importance of such specificity in the initiation process and its impact on the legality of penalty imposition. Reference to relevant precedents, including the judgment in a specific case, guided the Court's determination on this issue.

4. The final issue concerns the rejection of deduction and the validity of imposing a penalty on estimated income. The Court evaluated the legality of disallowing job working charges in the context of overall income estimation and the subsequent levy of penalties. The analysis encompassed the legal framework governing deductions, income estimation, and penalty imposition to arrive at a conclusion regarding the validity of the penalty levied in the given circumstances.

In conclusion, the Court, guided by legal principles and precedents, answered the substantial questions of law in favor of the assessee and against the revenue. The penalty orders for the relevant assessment years were set aside based on the Court's interpretation of the legal provisions and application of established jurisprudence.