2019 (12) TMI 1104 - AT - Income Tax

Penalty u/s 271(1 )(c) - non recording of proper satisfaction in terms of provisions of section 271(l)(c) - whether the assessee has concealed particulars of income or has furnished inaccurate particulars of such income during assessment proceedings - HELD THAT - Satisfaction recorded by the AO shows that at the time of initiating penalty AO himself was not aware enough if he has initiated the penalty proceedings on account of furnishing of inaccurate particulars of income or for concealment of income by the assessee rather mechanically sought to initiate the penalty proceedings u/s 271(1)(c) of the Act. When initiation of the penalty itself is not valid, it does not provide any cause of action as required u/s 271(1)(c) of the Act to levy the penalty on the assessee. Moreover when AO has not recorded valid satisfaction required u/s 271(1)(c) notice issued u/s 274 read with section 271(1)(c) to initiate the penalty proceeding is not specified one so as to make out if the assessee has concealed particulars of income or has furnished inaccurate particulars of such income. Ratio of CIT vs. SSA s Emerald Meadows 2016 (8) TMI 1145 - SC ORDER is applicable to the facts and circumstances of the present case because when at the time of initiating the penalty proceedings AO was not clear enough as to whether penalty proceedings have been initiated for concealment of particulars of income or furnishing inaccurate particulars of income, penalty cannot be levied. - Decided in favour of assessee.

Issues:
1. Validity of penalty under section 271(1)(c) of the Income Tax Act.
2. Justification for confirming penalty by the Ld. CIT(A).
3. Failure of the assessee to attend proceedings.
4. Assessment of unexplained cash credit and expenditure.
5. Adequacy of satisfaction recorded by the Assessing Officer for initiating penalty proceedings.
6. Compliance with legal requirements for penalty imposition.
7. Applicability of legal precedents in determining penalty validity.

Analysis:

1. The appellant sought to set aside the penalty order passed by the Commissioner of Income Tax(Appeals) for Assessment Year 2000-01, arguing that there was no proper satisfaction recorded for penalty imposition under section 271(1)(c) of the Act.

2. The Assessing Officer initiated penalty proceedings against the assessee for unexplained cash credit and expenditure, leading to a penalty of ?6,19,080. The Ld. CIT(A) confirmed the penalty, prompting the assessee to appeal before the Tribunal.

3. Despite notices, the assessee failed to attend the proceedings, resulting in the Tribunal deciding the appeal ex parte with the assistance of the Revenue's representative.

4. The addition made by the AO for unexplained cash credit and expenditure was confirmed by the CIT(A), and the assessee, being a sick company, did not participate in the proceedings.

5. The crucial issue was whether the assessee concealed income or furnished inaccurate particulars, with the AR arguing that the AO failed to establish valid satisfaction for initiating the penalty.

6. The AR contended that the AO did not specify under which limb of section 271(1)(c) the penalty proceedings were initiated, citing legal precedents to support the argument.

7. The Tribunal found that the AO's satisfaction for penalty initiation was inadequate, as it did not specify the grounds for penalty imposition. Relying on legal precedents, the Tribunal held that the penalty was not sustainable in law and ordered the deletion of the penalty.

In conclusion, the Tribunal allowed the appeal, emphasizing the necessity of valid satisfaction for initiating penalty proceedings and the importance of complying with legal requirements for penalty imposition.

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