2020 (4) TMI 363 - AT - Income Tax

Levying penalty u/s 271(1)(c) - assessee has filed the revised return of income by showing the additional income and on account of disallowance of claim u/s 54 in connection with the Juhu flats - As argued appellant had suo moto revised its computation of income and offered the same to tax - HELD THAT - In the revised return of income, there is no concealment of income and furnishing inaccurate particulars of income of any kind. Disallowance of claim u/s 54 of the I. T. Act, nowhere attract the penalty in view of the decision of Hon ble Apex Court in the case of Reliance Petroproduct Vs. CIT (P) Ltd. 2010 (3) TMI 80 - SUPREME COURT . Taking into account all the facts and circumstances, we are of the view that the finding of the CIT(A) is not justifiable, therefore, we set aside the same and delete the penalty. - Decided in favour of assessee.

Issues Involved:
1. Dismissal of appeal on technical grounds.
2. Levying of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
3. Penalty for revised computation of income.
4. Penalty for not challenging an addition to avoid litigation.
5. Initiation of penalty on one ground and levying on another.
6. Validity of notice issued under Section 274 read with Section 271(1)(c).

Detailed Analysis:

1. Dismissal of Appeal on Technical Grounds:
The assessee contended that the CIT(A) erred in dismissing the appeal merely because it was filed manually instead of electronically. This issue highlights the procedural aspect of the appeal filing process.

2. Levying of Penalty under Section 271(1)(c):
The assessee argued that the penalty of ?26,10,000/- levied by the Assessing Officer (AO) under Section 271(1)(c) was erroneous. The penalty was confirmed by the CIT(A), which led to the present appeal. The core contention was whether the penalty was justified given the circumstances.

3. Penalty for Revised Computation of Income:
The assessee revised the computation of income, offering additional income of ?1,08,07,020/- voluntarily without any discovery by the AO. The AO levied a penalty on this additional income. The assessee argued that since the revision was suo moto and not due to any concealment or inaccurate particulars, the penalty was unjustified.

4. Penalty for Not Challenging an Addition to Avoid Litigation:
The AO also levied a penalty concerning an addition of ?18,22,123/-, which the assessee did not challenge to avoid litigation. The assessee claimed that this addition was debatable and the decision to not challenge was to buy peace of mind, hence should not attract a penalty.

5. Initiation of Penalty on One Ground and Levying on Another:
The assessee pointed out that the AO initiated the penalty on one ground but levied it on another, which was procedurally incorrect and unjust.

6. Validity of Notice Issued under Section 274 read with Section 271(1)(c):
The notice issued under Section 274 read with Section 271(1)(c) was claimed to be bad in law as it did not specify the particular charge (concealment of income or furnishing inaccurate particulars) against the assessee. This lack of specificity was argued to invalidate the entire penalty proceedings.

Judgment Analysis:

Dismissal of Appeal on Technical Grounds:
The tribunal did not dwell extensively on this issue, as the primary focus was on the substantive grounds of the penalty.

Levying of Penalty under Section 271(1)(c):
The tribunal examined whether the penalty was justified under the circumstances. It was noted that the penalty under Section 271(1)(c) is applicable for either concealment of income or furnishing inaccurate particulars. The tribunal found that the notice issued by the AO did not specify which limb of Section 271(1)(c) was being invoked, leading to ambiguity and non-application of mind.

Penalty for Revised Computation of Income:
The tribunal observed that the assessee had voluntarily revised the computation of income and offered additional income without any detection by the AO. Citing the Supreme Court's decision in Reliance Petroproducts, it was held that merely making a claim which is not sustainable in law does not amount to furnishing inaccurate particulars. Hence, the penalty on this ground was not justified.

Penalty for Not Challenging an Addition to Avoid Litigation:
The tribunal agreed with the assessee's contention that not challenging an addition to avoid litigation and buy peace of mind, especially when the issue is debatable, should not attract a penalty.

Initiation of Penalty on One Ground and Levying on Another:
The tribunal found procedural lapses in the AO's approach, as the penalty was initiated on one ground and levied on another, which was not in accordance with the principles of natural justice.

Validity of Notice Issued under Section 274 read with Section 271(1)(c):
The tribunal placed significant emphasis on the validity of the notice. It was found that the notice did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, which was a critical procedural defect. The tribunal cited several judicial precedents, including the Supreme Court's decision in Dilip N. Shroff and the Bombay High Court's decision in Samson Perinchery, to support its conclusion that such a notice is invalid.

Conclusion:
The tribunal concluded that the penalty proceedings suffered from procedural defects and lack of application of mind. Consequently, the penalty imposed under Section 271(1)(c) was deleted, and the appeal filed by the assessee was allowed. The order of the CIT(A) confirming the penalty was set aside.

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