2019 (12) TMI 355 - AT - Income Tax

Levy of penalty u/s 271(1)(c) read with section 274 - search and seizure action under section 132 - assessee company offered undisclosed income in the Financial Year 2011-12, relevant to AY 201213 and paid the taxes accordingly - HELD THAT - AO in the assessment order has not initiated the penalty proceedings for a specific charge i.e. for concealment of particulars of income or for furnishing of inaccurate particulars of income. It means that the AO is not sure about the charge on which he is initiating the penalty under section 271(1)(c) of the Act. We find that this issue is squarely covered by the decision in the case of CIT vs Samson Perinchery 2017 (1) TMI 1292 - BOMBAY HIGH COURT . We noted that at the time of hearing the learned Sr. DR has not doubted the facts of the case but pointed out that there is due application of mind by the AO which can be demonstrated from the discussion in the assessment order and the order of CIT(A), wherein if discussed the reasons for the disallowance of depreciation, he has recorded the satisfaction that the penalty proceedings are initiated under section 271(1)(c) for concealing of particulars of income as well as for furnishing of inaccurate particulars of income. We are of the view, that the DR has admitted to demonstrate the application of mind by the AO but it is no difference in as much as that the AO in assessment order as initiated the penalty proceedings for both the charges i.e. for furnishing of inaccurate particulars of income as well as concealment of particulars of income. - Decided in favour of assessee.

Summary

Issues involved:
Levy of penalty under section 271(1)(c) read with section 274 of the Income-tax Act, 1961 based on identical facts and circumstances for assessment years 2012-13 to 2014-15.

Analysis:

1. Common Issue - Penalty Confirmation by CIT(A):
- The appeals of the assessee challenged the penalty levied under section 271(1)(c) by the Assessing Officer (AO) in a mechanical manner without specifying the exact grounds for initiating the penalty.
- The AO initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income and concealment of particulars of income without clarity on the specific charge.
- The CIT(A) confirmed the penalty on both limbs despite the specific plea raised by the assessee regarding the lack of clarity in the penalty notice.
- The CIT(A) justified the penalty by stating that there was both furnishing of inaccurate particulars of income and concealment of particulars of income.
- The AO's failure to specify the charge for penalty initiation was challenged based on the decision of the Hon'ble Bombay High Court in a similar case.
- Following the High Court's decision, the penalty was deleted on the jurisdictional issue without delving into the merits of the case.

2. Initiation of Penalty Proceedings:
- The AO initiated penalty proceedings under section 271(1)(c) without explicitly mentioning whether it was for concealment of income or furnishing inaccurate particulars of income.
- The lack of clarity in the penalty notice regarding the specific charge led to the deletion of the penalty based on the High Court's ruling.

3. Consistency in Deletion of Penalty:
- Given the identical facts and circumstances in assessment years 2013-14 and 2014-15, the penalty was deleted in those years as well to maintain a consistent view.

4. Final Decision:
- Ultimately, all the appeals of the assessee were allowed, and the penalty was deleted based on the jurisdictional issue related to the ambiguity in specifying the charge for penalty initiation.

In conclusion, the judgment focused on the necessity for clarity in specifying the grounds for initiating penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961. The decision highlighted the importance of clearly identifying whether the penalty is for furnishing inaccurate particulars of income or concealment of particulars of income. Based on the lack of specificity in the penalty notice and the High Court's precedent, the penalty was deleted across multiple assessment years.