2019 (5) TMI 1553 - AT - Income Tax

Penalty u/s 271 - charitable status of assessee underwent a change pursuant to amendment to Section 2(15) - HELD THAT - Penalty u/s 271 (1) (c), has not been initiated while passing assessment orders. The same has also been observed by CIT (A) in the impugned order. CIT (A) has also analysed audited accounts of assessee which reflected accumulated balance as on 31/03/08 in the return of income of assessee. It has been observed that charitable status of assessee underwent a change pursuant to amendment to Section 2(15). Because of this change in status, claim of assessee was inadmissible. We are therefore of considerable opinion, in present facts, it cannot be held that inaccurate particulars has been filed by assessee leading to concealment as argued by Ld.CIT(A). - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty imposed by AO, inaccurate particulars of income, initiation of penalty proceedings, satisfaction for penalty initiation, charitable status change, bonafide belief, penalty under section 271(1)(c) of the Act.

Analysis:
1. The appeal was filed by the revenue against the deletion of a penalty imposed by the Assessing Officer (AO). The AO had initiated penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961, based on inaccurate particulars of income. The CIT (Appeals) had deleted the penalty, citing reasons that the AO did not record his satisfaction for penalty initiation in the assessment order, and there was no evidence of inaccurate particulars of income provided by the AO.

2. The case involved a discrepancy in the charitable status of the assessee due to an amendment in Section 2(15) of the Act. The AO made an addition to the income of the assessee based on this discrepancy. Subsequently, penalty proceedings were initiated, and a 100% penalty was levied on the tax sought to be evaded for filing inaccurate particulars. The CIT (A) observed that the change in the charitable status of the assessee was beyond their control and that the claim made was a bonafide mistake, not inaccurate particulars of income.

3. The Tribunal analyzed the assessment orders and observed that the penalty under section 271(1)(c) was not initiated while passing the assessment orders. The CIT (A) had also noted this and found that the audited accounts of the assessee reflected the accumulated balance as on a specific date. Due to the change in the charitable status, the claim made by the assessee was inadmissible. The Tribunal concurred with the CIT (A) that in the given circumstances, it could not be concluded that inaccurate particulars were filed by the assessee leading to concealment of income.

4. The Tribunal upheld the decision of the CIT (A) and dismissed the grounds raised by the revenue. The appeal filed by the revenue was subsequently dismissed, affirming the deletion of the penalty imposed by the AO.

This judgment highlights the importance of recording satisfaction for penalty initiation, distinguishing between inaccurate particulars and bonafide mistakes, and considering changes in legal provisions affecting the status of the assessee. The decision provides clarity on the application of penalties under the Income Tax Act in cases of genuine errors and statutory changes impacting income calculations.