2019 (12) TMI 917 - AT - Income Tax

Penalty levied u/s.271(1)(c) - income declared during the course of survey - HELD THAT - AO should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation of penalty proceedings would be on both the limbs i.e. for furnishing inaccurate particulars of income or concealment of income or without any limbs of Section 271(1)(c) of the Act. The Assessing Officer has to mention specific limbs while imposing penalty u/s.271(1)(c) of the Act. The sanctity in terms of natural justice with regard to this proposition is that the assessee under the scheme of welfare legislation which is embedded in the Income Tax Act, 1961 should get an opportunity to prepare himself for the defense as regards to the exact charge on which penalty is imposed upon him u/s. 271(1)(c) of the Act. In the instant case, the charge is vague and therefore, levy of penalty is not warranted. Appeal of the assessee is allowed.

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on the assessment year 2013-14.

Analysis:
The case involved a partnership firm engaged in civil contract business where a survey under section 133A of the Act revealed additional income. The assessee declared additional income of ?40,74,643 after the survey operation, which was accepted by the Assessing Officer without adjustments. Subsequently, a penalty of ?12,59,100 was imposed under section 271(1)(c) of the Act, which was confirmed by the Ld. CIT(Appeals). The main contention of the assessee was the lack of valid satisfaction by the Assessing Officer in initiating penalty proceedings, citing legal requirements and relevant case laws like CIT Vs. Shri Samson Perinchery and CIT Vs. Manjunatha Cotton and Ginning Factory. The Assessing Officer's failure to specify the limb of section 271(1)(c) of the Act both during initiation and imposition of penalty was highlighted, leading to ambiguity and rendering the penalty order unsustainable in law.

The Tribunal referred to a similar issue decided in favor of the assessee in a previous case and emphasized the importance of the Assessing Officer clearly specifying the limb of section 271(1)(c) under which penalty is imposed. The lack of specificity deprives the assessee of the opportunity to prepare a defense, violating principles of natural justice. Relying on precedents and legal principles, the Tribunal set aside the order of the Ld. CIT(Appeals) and directed the Assessing Officer to delete the penalty imposed on the assessee. The decision was based on ensuring clarity and adherence to legal requirements in penalty proceedings under section 271(1)(c) of the Act.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the necessity for the Assessing Officer to specify the exact limb of section 271(1)(c) of the Act when initiating and imposing penalties to uphold principles of natural justice and legal clarity. The order was pronounced on 19th December 2019 by the Appellate Tribunal ITAT Pune, with the penalty being directed to be deleted from the assessee's records.