2019 (9) TMI 1029 - AT - Income Tax

Penalty u/s 271(1)(c) - maximum penalty @ 300% - Defective notice - non specification of any specific limb or clause whether penalty initiated for Concealment of income or for providing inaccurate particulars of income - HELD THAT - While passing the penalty order u/s. 271(1)(c) of the act, the assessing officer has categorically stated that this being second default of concealment of particulars of same type of income therefore he was satisfied to impose maximum penalty @ 300% of the tax sought to be evaded. Regarding contention of the assessee that assessing officer has failed to specify charge whether penalty is being imposed for furnishing inaccurate particulars or concealment of income. We find that this aspect has been considered by the Hon'ble Gujarat High Court in the case of Snita Transport P. Ld. Vs. ACIT 2012 (12) TMI 981 - HIGH COURT OF GUJARAT as observed that for the purpose of issuing show cause, the Id.AO can use expression and/or in between whether explanation of the assessee is being sought for concealment of income or furnishing of inaccurate particulars of income. However, while passing the final order, the AO has to specify his conclusion whether he visited the assessee with penalty for concealment of income or furnishing of inaccurate particulars. In the present case as AO has conclusively held in the penalty order that penalty is being imposed for concealment of particular of same type of income. On merit, we do not find any infirmity in the decision of ld. CIT(A). However, considering the totality of the facts that assessee was working as plant operator, we consider it will be justified to restrict the impugned penalty at 100% of tax sought to be evaded. The assessing officer is directed to levy penalty as directed above, therefore, the appeal of the assessee is partly allowed.

Summary

Issues involved:
1. Validity of penalty order under section 271(1)(c) of the Income Tax Act, 1961.
2. Whether penalty was imposed for concealment of income or furnishing inaccurate particulars of income.
3. Compliance by the assessee in penalty proceedings.
4. Justification of penalty amount imposed.
5. Applicability of judicial precedents in penalty proceedings.

Detailed analysis:
1. The appeal pertains to the validity of the penalty order under section 271(1)(c) of the Income Tax Act, 1961. The assessee contended that the notice issued did not specify the specific limb or clause for which the penalty was initiated, rendering it invalid and defective. The assessing officer imposed a penalty of 300% of the tax sought to be evaded for non-disclosure of commission income, which was confirmed by the CIT(A). The ITAT upheld the penalty but restricted it to 100% of the tax sought to be evaded, considering the nature of the default.

2. The issue of whether the penalty was imposed for concealment of income or furnishing inaccurate particulars of income was also raised. The assessing officer concluded that the penalty was for furnishing inaccurate particulars of income. The ITAT analyzed judicial precedents and held that the assessing officer must specify the charge clearly in the final penalty order, even if the notice uses "and/or." In this case, the AO conclusively held that the penalty was imposed for concealment of particular income, leading to the partial allowance of the appeal and a reduction in the penalty amount.

3. The compliance of the assessee during the penalty proceedings was scrutinized. The assessing officer issued multiple show cause notices and letters, but the assessee did not make any compliance. This non-compliance, coupled with the nature of the default being repeated, led to the imposition of a higher penalty amount. The ITAT considered the totality of the facts and directed the assessing officer to levy the penalty at a reduced rate of 100% of the tax sought to be evaded.

4. The justification of the penalty amount imposed was a crucial aspect of the case. The assessing officer imposed a penalty of 300% of the tax sought to be evaded, considering it as the second default of concealment. The CIT(A) restricted the penalty to 200%, taking into account the repeated default. The ITAT further reduced the penalty to 100% based on the nature of the default and the assessee's occupation as a plant operator.

5. The applicability of judicial precedents in penalty proceedings was highlighted during the case. The ITAT referred to the decision of the Hon'ble Gujarat High Court in a similar case to emphasize the importance of the assessing officer clearly specifying the charge in the final penalty order. The ITAT's decision was influenced by these judicial precedents, leading to the partial allowance of the assessee's appeal and the reduction of the penalty amount.

In conclusion, the ITAT's detailed analysis of the issues involved in the penalty proceedings resulted in the partial allowance of the appeal and a reduction in the penalty amount imposed on the assessee.