2021 (6) TMI 128 - AT - Income Tax

Penalty u/s. 271(1)(c) - Defective notice u/s 274 - concealment of income or frurnishing of inaccurate particulars of income - HELD THAT - We note that in assessment proceedings the assessing officer has initiated the penalty proceedings on account of furnishing inaccurate particulars of income , whereas in penalty proceedings, the assessing officer has imposed the penalty on account of both the limbs, that is, for concealment of income and furnishing inaccurate particulars of income , hence charge of penalty itself is not certain, therefore, the penalty should not be imposed. AO has initiated the penalty proceedings on one footing and concluded on other footing. In instant case, for furnishing inaccurate particulars of income was not the charge against the assessee; the charge was Concealment of particulars of income . Therefore, in our opinion, the basis of levy of penalty itself is not correct, hence penalty order under section 271(1)(c) of the Act needs to be quashed. Accordingly, we quash the penalty order under section 271(1) (c) of the Act. Appeal of the assessee is allowed.

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) by the Ld. CIT(A)
2. Discrepancies in charge of penalty between assessment order and penalty order

Analysis:

Issue 1: Confirmation of penalty under section 271(1)(c) by the Ld. CIT(A)
The appeal pertains to the Assessment Year 2006-07 and challenges the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer had initiated penalty proceedings due to discrepancies in the income declared by the assessee. The Ld. CIT(A) confirmed the penalty, citing concealment of income and furnishing inaccurate particulars of income. The assessee contested this, asserting that it had not concealed income and had provided accurate details. However, the Assessing Officer maintained that the penalty was justified based on the findings of the survey party and the assessment order. The Ld. CIT(A) upheld the penalty, leading to the appeal before the ITAT Surat.

Issue 2: Discrepancies in charge of penalty between assessment order and penalty order
The main contention raised by the assessee was the inconsistency in the charge of penalty between the assessment order and the penalty order. While the penalty was initiated for furnishing inaccurate particulars of income during the assessment, it was imposed for both concealment of income and furnishing inaccurate particulars during the penalty proceedings. This discrepancy raised concerns about the certainty of the charge for penalty imposition. The ITAT Surat noted legal precedents emphasizing the importance of clarity in specifying the grounds for penalty imposition. Citing relevant judgments, the ITAT Surat concluded that the basis for levying the penalty was incorrect as the charge against the assessee was for concealment of income, not furnishing inaccurate particulars of income. Consequently, the penalty order under section 271(1)(c) of the Act was quashed, and the appeal of the assessee was allowed.

In conclusion, the ITAT Surat ruled in favor of the assessee, setting aside the penalty imposed under section 271(1)(c) due to inconsistencies in the charge of penalty between the assessment order and the penalty order. The judgment highlighted the necessity for clarity and specificity in specifying the grounds for penalty imposition to ensure the validity and sustainability of such penalties.