2021 (3) TMI 1052 - AT - Income Tax

Penalty u/s 271(1)(c) - Assessment u/s 153A - person has failed to comply with the notice under Sub Section 2 of Section 115WD or under Sub Section 2 of Section 115WE or under Sub Section 1 of Section 142 or Sub Section 2 of Section 143 or fails to comply with a direction issued under Sub Section 2 A of Section 142 or has concealed the particulars of his income or furnished inaccurate particulars of such income - HELD THAT - In the present case from the perusal of the assessment order it is seen that the Assessing Officer has simply stated that I am satisfied that the assessee has concealed his income in the return filed u/s 139 thereby stating that the income was disclosed after the search and therefore expenditures are part of concealed income of the assessee. In-fact the assessee filed his return u/s 153(A) after enhancing the income on account of house renovation/repair expenses and the expenditure therefore in our opinion cannot be stated as concealment of income. Therefore the satisfaction in the instant case in our opinion is inadequate. For invoking Clause (c) of Section 271(1)(c) of the Act while issuing the notice the Assessing Officer has to categorically state upon under which limb the penalty is initiated since the assessee has to give reply to the notice issued u/s 271(1)(c) read with Section 274 in respect of concealment of particulars of income separately and that of furnishing of inaccurate particulars of income separately. In the present case though the initiation in the assessment order was on concealment of particulars of income the first primary stage of satisfaction was not given by the Assessing Officer. The initiation of penalty has been simply stated on concealment of income but which was not properly revealed in notice issued to the assessee. The Department cannot over look the technicalities and the procedure given under the Income Tax Statue which is a mandate to be followed by the tax authorities. The Revenue authorities cannot vaguely issue notices which are very much the basis of proceedings initiated under Income Tax statute. Coming to the actual penalty order the same is though stated upon concealment of particulars of income has not given the specification as to how the income was concealed when the expenditures which was incurred was not accounted in original return but revealed in the return filed u/s 153A - penalty order has made the specification of furnishing of inaccurate particulars of income. AO though finally imposed the penalty on concealment of particulars of income was not sure whether it is for furnishing of inaccurate particulars or concealment of income. The assessee has suo moto /voluntarily surrendered the amount before the Assessing Officer and paid the taxes thereupon. Thus on the merit also the assessee has proved that the penalty does not survive. - Decided in favour of assessee. Penalty u/s 271AAB on the undisclosed income - HELD THAT - The insertion of this Section is from Finance Act 2012 w.e.f 1/7/2012. The Section 271AAB shall be invoked in case where search has been initiated u/s 132 on or after 1st Day of July 2012. In the present case the search took place on 30/03/2016. This penalty can be imposed in addition to tax if any payable by him. The Assessing Officer specifically at the time of penalty proceedings contemplated Clause B of Section 271AAB of the Act. But the limb of Clause B specifically mentions that if such assessee in the course of search in a statement under Sub Clause 4 of Section 132 does not admit the undisclosed income. In the present case the assessee has very much admitted the undisclosed income and surrendered the undisclosed income. The assessee also paid the tax thereon. Besides this the notice upon which the assessee is bound to give reply is vague and not as per provisions of the Income Tax Statute. The Revenue Authorities have not properly adjudicated/ invoked in true spirit of the penalty Provisions to impose penalty on the assessee. Thus on the technicality as well as on merit the penalty does not survive. Hence appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act.
2. Levy of penalty under Section 271AAB of the Income Tax Act.
3. Validity of penalty notices and procedural compliance.
4. Voluntary disclosure and its impact on penalty imposition.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act:
The primary issue revolves around the confirmation of penalties under Section 271(1)(c) for various assessment years. The penalties were imposed due to additional income disclosed by the assessee in returns filed under Section 153A following a search operation. The Assessing Officer (AO) initiated penalty proceedings, alleging concealment of income and furnishing inaccurate particulars.

The Tribunal noted that the AO failed to specify the exact limb under Section 271(1)(c) for which the penalty was imposed, rendering the penalty notices vague and non-compliant with legal requirements. The Tribunal emphasized that the AO must clearly state whether the penalty is for concealment of income or furnishing inaccurate particulars, as per judicial precedents like CIT vs. SSA’s Emerald Meadows and CIT v. Manjunatha Cotton & Ginning Factory.

The Tribunal found that the AO's satisfaction regarding the concealment of income was inadequately recorded in the assessment order. The penalty orders also lacked specific reasoning for the alleged concealment, leading to the conclusion that the penalties were not sustainable.

2. Levy of Penalty under Section 271AAB of the Income Tax Act:
For the assessment year 2016-17, penalties were imposed under Section 271AAB, which deals with undisclosed income detected during a search operation. The AO concluded that the assessee had undisclosed income and imposed a penalty at the rate of 20% on the surrendered income.

The Tribunal observed that the assessee had admitted the undisclosed income and paid taxes thereon. The AO's penalty notice was found to be vague and not in compliance with the statutory provisions. The Tribunal held that the penalties under Section 271AAB could not be sustained due to procedural lapses and the assessee's voluntary disclosure.

3. Validity of Penalty Notices and Procedural Compliance:
A significant portion of the judgment dealt with the validity of penalty notices. The Tribunal reiterated that penalty notices must clearly specify the grounds for penalty—whether for concealment of income or furnishing inaccurate particulars. The lack of specificity in the notices was deemed a violation of natural justice and procedural requirements.

The Tribunal referred to various judicial precedents, including the Hon’ble Supreme Court's decision in SSA’s Emerald Meadows and the Hon’ble Delhi High Court's decision in Pr. CIT Vs. M/s. Sahara India Life Insurance Company Ltd., to underscore the importance of clear and specific penalty notices.

4. Voluntary Disclosure and Its Impact on Penalty Imposition:
The Tribunal also addressed the issue of voluntary disclosure. It was argued that the assessee's disclosure of additional income post-search was voluntary and should not attract penalties. The Tribunal, however, noted that voluntary disclosure does not automatically exempt an assessee from penalties if the disclosure is made after detection by the AO.

The Tribunal cited the Hon’ble Supreme Court's decision in Mak Data Pvt. Ltd. v. CIT, which held that voluntary disclosure does not preclude penalty imposition if the disclosure is made after detection of undisclosed income. Despite this, the Tribunal found that the AO's procedural lapses and vague penalty notices rendered the penalties unsustainable.

Conclusion:
The Tribunal allowed the appeals filed by the assessee for all assessment years, holding that the penalties imposed under Sections 271(1)(c) and 271AAB were not sustainable due to procedural lapses, vague penalty notices, and inadequate satisfaction recorded by the AO. The Tribunal emphasized the need for clear and specific penalty notices and adherence to procedural requirements, thereby setting aside the penalties.