2019 (3) TMI 562 - AT - Income Tax

Penalty u/s 271(1)(c) - estimation of profit of business - jurisdiction of AO levying the penalty on both the limbs i.e. for concealment of particulars of income and furnishing of inaccurate particulars of income - non specification of charge - HELD THAT - Penalty order passed by the AO under section 271(1)(c) of the Act is on the charge of inaccurate particulars of income in relation to estimation of business income whereas initiation is on the charge in the order of assessment is for concealment of particulars of income under section 271(1)(c) of the Act. The penalty cannot be levied under section 271(1)(c) of the Act on the charge which is different than the charge initiated i.e. charge initiated under section 271(1)(c) of the Act and penalty levied under different charge for filing of inaccurate particulars of income. See SHRI SAMSON PERINCHERY 2017 (1) TMI 1292 - BOMBAY HIGH COURT Specific charge - AO while levying penalty under section 271(1)(c) of the Act in his discussion clearly stated that the expression used in section 271(1)(c) of the Act furnishing of inaccurate particulars of income and concealing the particulars of income are two distinct term but according to him both lead to the same effect. He acknowledged that making bogus claim of expenses/ expenditure/ deduction / excess claim of depreciation amounts to furnish of inaccurate particulars income and therefore false claim of expenditure would amount to concealing the particulars of income or deliberate in furnishing inaccurate particulars of such income. Hence, on the issue of specific charge penalty levied by the AO cannot be sustained. - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Additional ground challenging the validity of the notice under section 274 read with section 271 of the Act and the penalty order under section 271(1)(c) of the Act.
3. Levying penalty for furnishing inaccurate particulars of income and concealment of income.
4. Discrepancy between the charge initiated and the charge under which penalty was levied.

Analysis:

Issue 1:
The appeal was regarding the confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals). The appellant firm contended various grounds challenging the penalty, including the fact that it had commenced business recently and the work carried out on the project did not generate income sufficient to file a return. The appellant also argued against the essentiality of mens rea for the penalty, application of Explanation 5A, and the absence of revenue loss due to disclosed income over two years. However, the Tribunal found that the penalty was initiated based on an estimation of profit and that the AO had not specifically mentioned Explanation 5A. Ultimately, the Tribunal allowed the appeal and canceled the penalty.

Issue 2:
An additional ground was raised challenging the validity of the notice under section 274 read with section 271 of the Act and the subsequent penalty order under section 271(1)(c) of the Act. The appellant argued that the penalty was levied on both limbs - concealment of income and furnishing inaccurate particulars of income, which was impermissible. The Tribunal admitted this additional ground as a legal issue and proceeded to adjudicate it based on legal precedents, ultimately quashing the notice and penalty order.

Issue 3:
The penalty was levied for furnishing inaccurate particulars of income and concealment of income under section 271(1)(c) of the Act. The AO observed a variance between the declared and assessed income, leading to the charge of concealing and furnishing inaccurate particulars of income. However, the Tribunal found that the charge initiated and the penalty levied were different, citing a judgment by the Hon’ble Bombay High Court. The Tribunal concluded that the specific charge for penalty could not be sustained, leading to the reversal of the lower authorities’ orders confirming the penalty.

Issue 4:
There was a discrepancy noted between the charge initiated by the AO and the charge under which the penalty was levied. The AO had initiated the penalty on the basis of concealment of income, but the penalty order was for furnishing inaccurate particulars of income. The Tribunal referred to a case law and emphasized the importance of clarity in the initiation and imposition of penalties under section 271(1)(c) of the Act. Consequently, the Tribunal reversed the orders of the lower authorities and allowed the appeal of the assessee.

In conclusion, the Tribunal's detailed analysis and application of legal principles led to the cancellation of the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 in this case.