2020 (11) TMI 734 - AT - Income Tax

Penalty u/s 271(1)(c) - exemption u/s 11 and 12 disallowed - benefit of section 11(1A) is not available to assessee because of investment in shares of Tata sons Ltd as per section 11(1) and investment in shares of Tata Sons Ltd is not held as Corpus fund - AO held that the assessee is hit by the provisions of section 13(1)(d)(i) and 13(1)(d)(iii) - Assessee argued that the penalty notice nowhere speaks about specific limb to levy the penalty because the particular charge was not tick off in the notice - HELD THAT - It is not in dispute that the penalty u/s 271(c) of the Act is leviable on account of the concealment of particular of income and on account of furnishing the inaccurate particulars of income. Both have different connotations. In this regard, the Hon ble Supreme Court has appreciated the distinction between both the limb in the case Dilip N. Shroff 2007 (5) TMI 198 - SUPREME COURT . As per the record, the assessment order speaks about levying the penalty on account of furnishing the inaccurate particulars of income but the notice nowhere specify any limb to levy the penalty. The notice is not justifiable in view of the law settled by the Bombay High Court in the case of CIT-11 Vs. Samson Perinchery. 2017 (1) TMI 1292 - BOMBAY HIGH COURT . It is quite clear that the penalty is not leviable in accordance with law. Since the penalty is not sustainable on the issue of defective notice, therefore, we are not inclined to decide the matter of controversy on merits. Declining the claim of the assessee by the AO nowhere attracted the penalty being it is not a case of furnishing the inaccurate particulars of income and concealment of particulars of income, the assessee has fully disclosed each and every facts and thereafter claimed exemption u/s 11 12 of the Act. However, the same was declined. No penalty is leviable in the said circumstances and in this regard, we also find support of the decision in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT - Decided in favour of assessee.

Issues Involved:

1. Penalty under section 271(1)(c) of the Income Tax Act.
2. Limitation of time for passing the penalty order.
3. Furnishing of inaccurate particulars of income.

Issue-wise Detailed Analysis:

Issue No. 1 & 3: Penalty under section 271(1)(c) and Furnishing of Inaccurate Particulars of Income

The assessee contested the confirmation of the penalty levied by the AO under section 271(1)(c) of the Income Tax Act. The main argument was that the penalty notice did not specify the exact charge, whether it was for concealment of income or for furnishing inaccurate particulars of income, as the specific limb was not ticked off in the notice. This lack of specificity was argued to render the penalty unsustainable. The assessee relied on the precedent set by the case of CIT-11 Vs. Samson Perinchery and the ITAT Mumbai Bench in Meherjee Cassinath Holdings P. Ltd. Vs. ACIT, Circle-4(2).

The Tribunal noted that the penalty under section 271(1)(c) can be levied for either concealing particulars of income or furnishing inaccurate particulars of income, both having different connotations. The Supreme Court in Dilip N. Shroff (161 taxman 218) had distinguished between these two limbs. The assessment order indicated the penalty was for furnishing inaccurate particulars of income, but the notice did not specify this, making it non-compliant with the principles of natural justice.

The Tribunal referenced the case of Meherjee Cassinath Holdings P. Ltd., where the non-striking off of the irrelevant limb in the penalty notice was seen as a reflection of non-application of mind by the AO. The Tribunal found that the AO's failure to specify the charge in the notice rendered the penalty notice defective, leading to the conclusion that the penalty was not sustainable.

The Tribunal also noted that the assessee had fully disclosed all facts and claimed exemption under sections 11 and 12, which was declined by the AO. This did not constitute furnishing inaccurate particulars or concealing income, thus no penalty was leviable. The Tribunal supported this view with the decision in CIT Vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC) and PCIT Vs. Rasiklal M. Parikh, ITA No. 169 of 2017.

Additionally, the Tribunal observed that the Bombay High Court had admitted the assessee's appeal on substantial questions of law, indicating that the penalty was not justified. The Tribunal cited the jurisdictional High Court decisions in CIT Vs. Aditya Birla Power Co. Ltd. and CIT Vs. Nayan Builders & Developers to support the deletion of the penalty.

Issue No. 2: Limitation of Time for Passing the Penalty Order

Since the penalty was deleted based on the defective notice, the Tribunal did not find it necessary to address the issue of limitation of time for passing the penalty order, deeming it academic in nature.

Reasons for Delay in Pronouncement of Order

The Tribunal acknowledged the delay in pronouncement of the order due to the nationwide lockdown imposed by the Government of India in response to the COVID-19 pandemic. The lockdown caused unprecedented disruption in judicial work, justifying the delay. The Tribunal referred to the decision in DCIT V/s JSW Limited, where similar circumstances were considered, and the period of lockdown was excluded from the computation of the 90-day time limit for pronouncement of orders.

Conclusion

The Tribunal allowed the appeal filed by the assessee, setting aside the CIT(A)'s findings and deleting the penalty imposed under section 271(1)(c) of the Income Tax Act.

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