2020 (6) TMI 191 - AT - Income Tax

Penalty u/s 271(l)(c) - assessee has furnished inaccurate particulars of income by claiming excessive deduction under section 54F - contention of the assessee that there was no specific charge levied by the AO whether the assessee has concealed the particulars of income or furnished inaccurate particular of income - HELD THAT - AO has mentioned the specific charge in the penalty order by stating that the assessee has furnished inaccurate particulars of income. Accordingly we hold that, the assessee cannot get the benefit of immunity from the penalty merely there was no specific charge in the penalty notice issued under section 274 of the Act or in the assessment order. We, in this regard, draw support and guidance from the judgment of Snita Transport Pvt. Ltd. 2012 (12) TMI 981 - HIGH COURT OF GUJARAT wherein it was held that penalty cannot be imposed without mentioning the specific charge. Whether the assessee has furnished inaccurate particulars of income with respect to such excess deduction claimed under section 54F ? - The term inaccurate particular of income has not been defined under the provisions of section 271(1)(c) or elsewhere in the Act the Act. However, the meaning of the term inaccurate has been discussed in the case of Reliance Petroproducts (P) Ltd 2010 (3) TMI 80 - SUPREME COURT wherein it was held that the term inaccurate signifies deliberate act or omission on the part of the assessee. As such, the details/information contained in the return of income /financial statements /audit report which are not correct according to truth, and were furnished by the assessee with the dishonest intent shall be treated as inaccurate particulars. In the present case we find that the deduction under section 54F of the Act was claimed for the investment made by the assessee in two properties. The fact for the purchase of two properties was not doubted by the authorities below. The assessee has immediately on receipt of the notice under section 142(1) of the Act has revised the computation of income restricting the deduction claimed under section 54F of the Act from ₹ 89,83,817.00 and paid the due taxes. Thus it is transpired that the assessee has claimed deduction for the investment in two properties under the bona-fide believe and he did not claim excessive deduction under section 54F of the Act deliberately. Revenue has also not brought any material suggesting that the assessee deliberately furnished the inaccurate particulars of income. In our considered view any addition/disallowances made during the quantum proceedings does not automatically justify the levy of the penalty under section 271(1)(c) of the Act. - Decided in favour of assessee.

Issues Involved:
1. Legality of the penalty order passed by the Commissioner of Income Tax (Appeals).
2. Validity of penalty under section 271(1)(c) of the Income Tax Act, 1961.
3. Specificity of the charge in the penalty notice issued under section 274.
4. Determination of whether the assessee furnished inaccurate particulars of income.

Issue-wise Detailed Analysis:

1. Legality of the penalty order passed by the Commissioner of Income Tax (Appeals):
The assessee challenged the order of the Commissioner of Income Tax (Appeals)-2, Vadodara, dated 07/08/2017, which confirmed the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The assessee contended that the order was bad in law and contrary to legal pronouncements, arguing for its quashing.

2. Validity of penalty under section 271(1)(c) of the Income Tax Act, 1961:
The primary contention was that the penalty imposed at 200% of the tax sought to be evaded was unjustified as the assessee had not furnished inaccurate particulars nor concealed particulars intentionally. The assessee had revised the computation of income during the assessment proceedings voluntarily, and thus, the penalty should be dropped.

3. Specificity of the charge in the penalty notice issued under section 274:
The assessee argued that the penalty proceedings were void ab initio because the notice issued under section 274 read with section 271 did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The notice's ambiguity rendered it unclear which default the penalty was being levied for.

4. Determination of whether the assessee furnished inaccurate particulars of income:
The facts revealed that the assessee, engaged in the construction business and a partner in partnership firms, claimed a deduction under section 54F of the Act, which was later revised during assessment proceedings. The Assessing Officer (AO) viewed this as furnishing inaccurate particulars of income, leading to the initiation of penalty proceedings and imposition of a penalty of ?29,50,170. The CIT (A) reduced the penalty to 200% of the tax sought to be evaded, citing that the assessee had consciously claimed a higher exemption under section 54F without furnishing necessary details initially.

Detailed Analysis:

Legality of the Penalty Order:
The assessee contended that the penalty order was contrary to legal pronouncements and should be quashed. The CIT (A) upheld the penalty but reduced it from 300% to 200% of the tax sought to be evaded, indicating that the assessee had not provided a plausible explanation for the higher exemption claim under section 54F.

Validity of Penalty under Section 271(1)(c):
The assessee argued that the penalty was unjustified as there was no conscious concealment or deliberate furnishing of inaccurate particulars. The revised computation was filed voluntarily before any detection by the Revenue. However, the CIT (A) held that the assessee could not be absolved from penal consequences merely because the computation was revised after the AO's inquiry.

Specificity of the Charge in Penalty Notice:
The assessee claimed that the penalty notice was ambiguous, not specifying whether the penalty was for concealment or furnishing inaccurate particulars. The tribunal noted that the AO had mentioned the specific charge in the penalty order, stating that the assessee furnished inaccurate particulars of income. The tribunal referenced the jurisdictional High Court's judgment, which required a clear finding for penalty imposition.

Determination of Inaccurate Particulars:
The tribunal analyzed whether the assessee furnished inaccurate particulars. It was noted that the deduction under section 54F was claimed for investments in two properties, which was not doubted by the authorities. The revised computation was filed promptly upon receiving the notice under section 142(1). The tribunal found no material suggesting deliberate furnishing of inaccurate particulars by the assessee. It emphasized that mere disallowance or addition during quantum proceedings does not justify penalty imposition without evidence of conscious concealment or inaccurate particulars.

Conclusion:
The tribunal concluded that the penalty under section 271(1)(c) was not justified. It set aside the CIT (A)'s order and directed the AO to delete the penalty. The appeal of the assessee was allowed, and the order was pronounced on 01/06/2020 at Ahmedabad.

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