2020 (1) TMI 492 - AT - Income Tax

Penalty u/s 271(1)(c) - AO has not struck off inapplicable charge/limb - HELD THAT - It is now well settled proposition of law that the expressions concealment of particulars of income and furnishing of inaccurate particulars of income connote different meanings. This legal position has been explained by Hon ble Supreme Court in the case of Dilip N Shroff 2007 (5) TMI 198 - SUPREME COURT which has been reproduced by Hon ble Supreme Court in the case of T. Ashok Pai vs. CIT 2007 (5) TMI 199 - SUPREME COURT In the instant case, we have noticed that the assessing officer was not clear on the charge/limb he wanted to invoke in respect of disallowance made by him while computing book profit. In the assessment order, he has not referred to any of the link. In the penalty order, the AO states initially that it is a case of concealment of income, but proceeds to levy penalty for concealment of income and furnishing of inaccurate particulars of income. As per the decision rendered by Hon ble Supreme Court in the case of Dilip N Shroff (supra), the addition may fall under any of the two limbs. We notice that the assessee has fully disclosed all the particulars relating to waiver benefits in its return of income. Hence it cannot certainly a case of furnishing of inaccurate particulars of income at all. All these factors would show that the AO was not clear as to charge for which he has initiated penalty proceedings. In any case, we have noticed that the AO has also not struck off inapplicable limb in the penalty notice, which further fortifies the case that the assessing officer has not applied his mind. Hence, as per the decision rendered by Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT the penalty order is liable to be quashed.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for concealment of income or furnishing inaccurate particulars of income.

Analysis:

Issue 1: Penalty for disallowance of claim under section 115JB
The appeal was against the penalty imposed by the assessing officer under section 271(1)(c) of the Act for disallowing a claim related to waiver benefits received by the assessee. The AO re-computed the book profit under section 115JB by disallowing the claim, which was confirmed by the CIT(A) and the Tribunal. The penalty was imposed for the addition made during reassessment proceedings. The assessee argued that the claim was disclosed in the Profit and Loss account and considered as a capital receipt, hence excluded from the net profit while computing book profit. The issue was whether the AO was justified in levying the penalty.

Issue 2: Clarity in initiating penalty proceedings
The assessing officer initiated penalty proceedings under section 271(1)(c) without clearly specifying the nature of charge - whether for concealment of income or furnishing inaccurate particulars of income. The AO did not strike off the inapplicable portion in the penalty notice, indicating confusion regarding the reason for initiating the penalty. The assessee contended that the AO cannot levy penalty under both limbs and cited the decision of the Hon'ble Karnataka High Court in a similar case.

Issue 3: Legal interpretation of 'concealment of income' and 'furnishing inaccurate particulars'
The Tribunal analyzed the legal distinction between 'concealment of particulars of income' and 'furnishing of inaccurate particulars of income' as per precedents set by the Hon'ble Supreme Court. The Tribunal referred to the case of Dilip N Shroff and T. Ashok Pai to explain the meanings of these terms. It was emphasized that the penalty provisions under section 271(1)(c) are penal in nature, and the burden lies on the department to establish concealment. The Tribunal highlighted the importance of clear charges and the need for strict construction of penalty provisions.

Conclusion:
The Tribunal found that the assessing officer lacked clarity in specifying the charge for initiating penalty proceedings. Due to the confusion and failure to strike off inapplicable limbs in the penalty notice, the penalty order was deemed liable to be quashed. Citing the decision of the Hon'ble Karnataka High Court, the Tribunal allowed the appeal of the assessee and quashed the orders passed by the tax authorities, thereby relieving the assessee from the imposed penalty.