2019 (7) TMI 600 - AT - Income Tax

Penalty levied u/s 271(1)(c) - addition u/s 68 - defective notice - no proper satisfaction for initiating penalty proceedings by AO - HELD THAT - AO has failed to come to finding as to which limb of section 271(1)(c) has not been fulfilled by assessee and thus, has not issued proper show cause notice to the assessee in this regard. Penalty has been levied under section 271(1)(c) for furnishing inaccurate particulars of income. Where the AO has failed to give proper show cause notice to assessee vis- -vis limb in respect of which he wants to initiate penalty proceedings, then in the absence of proper satisfaction, order passed under section 271(1)(c) cannot stand. We find support from the ratio laid down in CIT Vs. Shri Samson Perinchery 2017 (1) TMI 1292 - BOMBAY HIGH COURT wherein it was held that where there is no proper satisfaction for initiating penalty proceedings and in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty. In the present case, AO has failed to conclude which limb of section 271(1)(c) is applicable, hence order suffers from infirmity. Accordingly, we delete the penalty levied under section 271(1)(c). The grounds of appeal raised by assessee are thus, allowed. - Appeal of assessee is allowed.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The appeal was filed against the order of CIT(A)-1, Nashik, related to the assessment year 2010-11 concerning the penalty levied under section 271(1)(c) of the Income-tax Act. The appellant raised various grounds of appeal challenging the penalty imposed. The primary contentions included the ex-parte order passed by CIT(A), the discrepancy between the grounds for penalty initiation and imposition, and the failure to consider facts submitted during the quantum appeal. The only issue raised in the appeal was against the penalty under section 271(1)(c) of the Act.

The case involved the assessee declaring total income of ?14,22,180, with scrutiny revealing an addition under section 68 of the Act related to advances credited to 45 persons amounting to ?1,80,00,000. The Assessing Officer initiated penalty proceedings for furnishing inaccurate particulars of income and concealment of income, ultimately levying a penalty of ?56,61,974 for concealment of income. The CIT(A) confirmed the penalty, leading to the appeal.

During the appeal hearing, it was noted that the Assessing Officer had failed to specify which limb of section 271(1)(c) the assessee had contravened, leading to an improper show cause notice. Citing the precedent set by the Bombay High Court in a similar case, it was established that without proper satisfaction for initiating penalty proceedings and a lack of a suitable show cause notice, the penalty could not be justified. Consequently, the penalty levied under section 271(1)(c) was deleted, and the appeal of the assessee was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, highlighting the importance of proper satisfaction and show cause notice in penalty proceedings under section 271(1)(c) of the Income-tax Act. The judgment emphasized the necessity of clearly identifying the specific violation by the assessee before imposing penalties, ensuring procedural fairness and compliance with legal requirements.