2020 (7) TMI 210 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - non specification of charge - Disallowance u/s 14A read with Rule 8D - HELD THAT - On perusal of assessment order, it is observed that Ld. AO initiated penalty under section 271(1)(c) of the Act, without specifying, whether there is concealment of income or filing of inaccurate particulars. Penalty was initiated on both limbs. Impugned notice initiating penalty proceedings under section 274 read with 271 is also on both limbs, as there is no strike off of irrelevant limbs. Ld. AO while discussing independent additions in assessment order, did not specify any of the limbs for which penalty is initiated. Order passed by Ld.AO under section 271(1)(c) is for concealment of income by filing inaccurate particulars of income. In assessment order, we note that, Ld.AO did not initiate penalty under any particular limb, vis-a-vis disallowances made. Thus it is clear that assessing officer intended to levy penalty for concealment, which either specified in notice nor in assessment order. Entire penalty proceedings is without application of mind. - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) for disallowed business expenses.

Analysis:
1. The appeal was filed by the revenue against the order passed by Ld.CIT(A)-3 for the assessment year 2014-15. The assessee filed a cross objection supporting the order passed by Ld.CIT(A) on various grounds related to the disallowance of business expenses.
2. The assessment order under section 143(3) disallowed employee benefit expenses, traveling and conveyance expenses, legal and professional expenses, and made disallowances under Rule 8D for a total amount. Penalty proceedings under section 271(1)(c) were initiated by the Ld.AO.
3. The notice issued to the assessee did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The Ld.CIT(A)-3 passed an order confirming certain disallowances but deleted the penalty levied by the Ld.AO.
4. The revenue appealed against the order of Ld.CIT(A), arguing that the penalty should have been upheld. The ITAT analyzed the issue and found that the Ld.AO did not specify the grounds for initiating the penalty in the assessment order.
5. The ITAT concluded that the penalty proceedings lacked clarity as to the specific grounds for penalty imposition. As a result, the penalty order was quashed, and the appeal by the revenue was dismissed. The cross objection filed by the assessee was also dismissed as infructuous.

This detailed analysis of the judgment highlights the issues involved, the arguments presented, and the final decision by the ITAT regarding the penalty imposed for disallowed business expenses.