2020 (11) TMI 3 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Defective notice - HELD THAT - In this case at the time of initiation of the penalty proceedings, show cause notice u/s 274 read with Section 271(1)(c) of the Act was issued on 24.07.2017 wherein the ld. AO did not strike off any of the twin charges on which penalty is initiated. Hon ble Delhi High Court in Pr. CIT Vs. Sahara India Life Insurance Co. Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT has categorically held that penalty is not sustainable if none of the twin charges in notice under Section 274 of the Act are cancelled or strike off. Penalty levied by the ld. Assessing Officer is not sustainable in law, hence we reverse the orders of the lower authorities and cancel the penalty levied by the ld. Assessing Officer under Section 271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2014-15.

Analysis:
1. The appellant contested the penalty levied under Section 271(1)(c) of the Act, arguing that there was no addition to the returned income and the tax due had already been paid, negating contumacious conduct necessary for penalty imposition.
2. The appellant also challenged the penalty on the grounds that the notice and subsequent order lacked specific allegations of concealment or furnishing inaccurate particulars.
3. The Assessing Officer initiated penalty proceedings after the assessee admitted to receiving bogus long-term capital gain. The appellant included the income in the return and paid the tax due, but the penalty was still imposed.
4. The appellant appealed to the CIT (Appeals), citing judicial precedents and arguing that the penalty notice was unsustainable as the income was disclosed in the return post-reopening.
5. The Authorized Representative contended that the penalty initiation was invalid due to the absence of striking off twin charges in the notice, referencing relevant case law.
6. The Departmental Representative maintained that the penalty initiation was valid based on the assessment order's findings of concealed income.
7. Both parties presented various judicial precedents to support their arguments.
8. The Tribunal, considering the contentions and lower authorities' orders, found that the penalty notice's failure to strike off twin charges rendered the penalty unsustainable, citing decisions of the Delhi High Court and Karnataka High Court.
9. Consequently, the Tribunal reversed the lower authorities' orders and canceled the penalty imposed under Section 271(1)(c) of the Act.
10. As a result of the penalty cancellation, other grounds of appeal were deemed academic and not adjudicated, leading to the allowance of the assessee's appeal.

This comprehensive analysis highlights the legal proceedings, arguments made by both parties, relevant case law references, and the Tribunal's final decision to cancel the penalty imposed under Section 271(1)(c) of the Income Tax Act for the specified Assessment Year.