2021 (1) TMI 398 - AT - Income Tax

Rectification of mistake u/s 254 - penalty under section 271(1)(c) confirmed by Tribunal - HELD THAT -Tribunal has considered that since in quantum proceedings the assessee s appeal was dismissed and additions sustained by the ld CIT(A), has been confirmed. We note that ld Counsel submitted various case laws relating to penalty under section 271(1)(c) which relates to interpretation of legal issue vis- -vis facts. To examine the legal interpretation and to examine the finding of the Tribunal is nothing but review of its own order, which is not permitted under the Act. Power to rectify an order, under section 254(2) of the Act is extremely limited and it does not extend to correcting errors of law, or re-appreciating factual findings. The plain meaning of the word 'apparent' is that it must be something which appears to be ex-facie and incapable of argument and debate. Under section 254(2) the Tribunal has jurisdiction only to rectify mistakes apparent from record that are brought to its notice, it cannot go into the merits of the appeal again. Therefore, we dismiss the miscellaneous application of the assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on findings in quantum proceedings; Distinction between penalty and quantum proceedings; Adjudication of additional ground by the Tribunal.

Analysis:

Issue 1: Levy of Penalty based on Quantum Proceedings
The assessee contended that the penalty under section 271(1)(c) should not be levied solely based on findings in quantum proceedings as penalty proceedings are distinct. The Tribunal had imposed a penalty of ?7,72,888 based on loans received by the assessee. The assessee argued that no evidence was found during the survey to prove the loans were bogus. The counsel cited various legal precedents to support the argument that penalty should not be levied merely on the basis of quantum proceedings where the income was disclosed during the survey.

Issue 2: Distinction between Concealment and Inaccurate Particulars
The assessing officer levied the penalty for furnishing inaccurate particulars of income, not for concealment. The counsel argued that invoking Explanation 1 to section 271(1)(c) was incorrect, and penalty should not be imposed for unexplained cash credit. Citing case laws, the assessee contended that the assessment order lacked clarity on why penalty proceedings were initiated, which should render the penalty void.

Issue 3: Adjudication of Additional Ground
The assessee claimed that the Tribunal failed to adjudicate on an additional ground challenging the penalty confirmation due to lack of specificity in the notice under section 271(1)(c) regarding the nature of the penalty. Various legal precedents were cited to support this argument, emphasizing the importance of clarity in penalty notices.

The Tribunal, after hearing both parties, noted that the penalty was confirmed in quantum proceedings where the additions made by the assessing officer were sustained. It emphasized that the power to rectify an order under section 254(2) was limited to correcting apparent mistakes and not to review legal interpretations or factual findings. As the Tribunal's jurisdiction did not extend to re-examining the merits of the appeal, the miscellaneous application of the assessee was dismissed on 18/12/2020.

This detailed analysis of the judgment highlights the key issues raised by the parties, the legal arguments presented, and the Tribunal's decision based on the limited scope of rectification under the Income Tax Act.