2019 (3) TMI 1158 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice - return of income declaring the total income at NIL - addition of capital gain - recording the satisfaction at the time of initiation of penalty proceedings u/s 271(1)(c) - HELD THAT - The legal requirement of making a clear cut reference to the applicable limb of clause (c) of section 271(1) of the Act is not met by the Assessing Officer while initiating and levying the penalty u/s 271(1)(c) of the Act. Thus, the satisfaction suffers from ambiguity in the mind of the Assessing Officer. Therefore, we are of the opinion that, considering the above referred binding judgments, such penalty order is unsustainable in law legally. It is a settled legal proposition that the Assessing Officer is under obligation to specify the appropriate limb of clause (c) of section 271(1) of the Act at the time of initiation as well as at the time of levy of penalty. We are of the opinion that the order of the CIT(A) is reasoned one on this legal issue. Thus, we do not find any infirmity in the order of the CIT(A) on this legal issue. Accordingly, the ground raised by the Revenue is dismissed.

Issues Involved:
1. Interpretation of provisions of section 271(1)(c) of the Income Tax Act.
2. Ambiguity in satisfaction recorded by Assessing Officer for penalty proceedings.
3. Condonation of delay in filing cross objection.

Analysis:

Issue 1: Interpretation of provisions of section 271(1)(c) of the Income Tax Act
The appeal before the Appellate Tribunal concerned the deletion of penalty under section 271(1)(c) of the Income Tax Act by the CIT(A). The case involved an addition made by the Assessing Officer to the total income of the assessee, leading to penalty proceedings. The CIT(A) relied on judicial precedents and canceled the penalty. The Tribunal observed that the Assessing Officer failed to specify the applicable limb of clause (c) of section 271(1) at the time of initiating the penalty. The Tribunal referred to binding judgments and held that the penalty order lacked legal sustainability. It emphasized the necessity for a clear reference to the specific limb of the clause, concluding that the penalty was unsustainable in law. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision.

Issue 2: Ambiguity in satisfaction recorded by Assessing Officer for penalty proceedings
The Tribunal noted the ambiguity in the Assessing Officer's satisfaction while initiating and levying the penalty under section 271(1)(c) of the Act. It highlighted the absence of a specific reference to the applicable limb of the clause, which led to the penalty order being legally unsustainable. The Tribunal, after considering arguments from both parties, concluded that the Assessing Officer's satisfaction suffered from ambiguity. It reiterated the legal requirement for a clear-cut reference to the relevant limb of the clause, emphasizing the Assessing Officer's obligation in this regard. The Tribunal found the CIT(A)'s decision reasoned and upheld it, dismissing the Revenue's appeal on this legal issue.

Issue 3: Condonation of delay in filing cross objection
The cross objection filed by the assessee was accompanied by a delay of 157 days, which the Tribunal condoned after considering the reasons provided in an affidavit. The Tribunal deemed it a fit case for condonation of delay and proceeded to adjudicate the cross objection. Despite the relief granted by the CIT(A) to the assessee on the legal issue, the Tribunal found the cross objection to be an academic exercise and dismissed it accordingly. The Tribunal emphasized the reasoned nature of the CIT(A)'s order, indicating no need for interference. Consequently, the cross objection was dismissed as academic.

In conclusion, the Appellate Tribunal upheld the CIT(A)'s decision, dismissed the Revenue's appeal, and the cross objection of the assessee. The order was pronounced on March 19, 2019.

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