2021 (6) TMI 612 - AT - Income Tax

Penalty u/s 271AAB/271(1)(c) - cash was seized u/s 132A - disclosure was made by the assessee only because cash was seized by the department - HELD THAT - A perusal of the same would show that penalty has been proposed by Ld. AO u/s 271AAB of the Act. Another notice has been issued on 22/01/2018 which show-cause the assessee to defend the penalty as proposed in notice u/s 271(1)(c) for concealment of income as well as for furnishing of inaccurate particulars of income - penalty has finally been levied u/s 271(1)(c) for concealment of income as well as for furnishing of inaccurate particulars of income. The chronology of the events would show that Ld. AO has failed to frame as well as specify the exact charge for which penalty was being levied against the assessee. Both the stated limbs i.e. concealment of income furnishing inaccurate particulars of income as per settled legal position carry different connotations and operate differently. As obligatory on the part of Ld. AO to frame specific charge against the assessee before levying penalty. The failure to do the same would render the penalty null and void in the eyes of law. No doubt the discrepancies were found during the survey. This has yielded income from the assessee in the form of amount surrendered by the assessee. Presently we are not concerned with the assessment of income but the moot question is to whether this would attract penalty upon the assessee under the provisions of section 271(1)(c) - Obviously no penalty can be imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Since the assessee was exposed during survey may be it would have not disclosed the income but for the said survey. However there cannot be any penalty only on surmises conjectures and possibilities. Section 271(1)(c) of the Act has to be construed strictly. Unless it is found that there is actually a concealment or nondisclosure of the particulars of income penalty cannot be imposed. There is no such concealment or non-disclosure as the assessee had made a complete disclosure in the income-tax return and offered the surrendered amount for the purposes of tax. In view of the fact that returned income has finally been accepted by the revenue no penalty could be imposed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Delay in filing appeals by both the assessee and the revenue.
3. Legality of the penalty imposed due to alleged concealment of income and furnishing of inaccurate particulars.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The primary issue in the cross-appeals is the imposition of penalty under Section 271(1)(c) of the Income Tax Act. The Assessing Officer (AO) imposed a penalty of ?104.64 Lacs, calculated at 200% of the tax sought to be evaded by the assessee. Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] reduced the penalty to 100% of the tax sought to be evaded, amounting to ?52.32 Lacs. Both the revenue and the assessee have contested this decision, leading to the current cross-appeals.

2. Delay in Filing Appeals:
The registry noted a delay of 101 days in the assessee's appeal, which was attributed to the late receipt of the physical order and the Covid-19 lockdown. The delay was condoned based on principles laid down by the Hon'ble Supreme Court in Collector, Land Acquisition V/s Mst. Katiji. Similarly, a delay of 210 days was noted in the revenue's appeal, but it was filed within the extended time as per the Gazette of India notification, and thus, the delay was also condoned.

3. Legality of the Penalty Imposed:
a. Factual Background:
The penalty arose from an assessment framed against the assessee for AY 2013-14, where an additional income of ?175 Lacs was offered by the assessee after cash was seized from an employee of Ryan International School. The assessee admitted that the cash belonged to him and included it in his return of income, which was accepted by the AO.

b. Legal Grounds:
The assessee argued that there was no concealment or furnishing of inaccurate particulars since the returned income was accepted by the AO. The revenue contended that the disclosure was made only because the cash was seized, implying that it would not have been declared otherwise.

c. Tribunal's Findings:
The Tribunal noted that the penalty was initiated under both Section 271AAB and Section 271(1)(c), but the specific charge was not framed clearly. The AO failed to specify whether the penalty was for concealment of income or furnishing inaccurate particulars, rendering the penalty proceedings vague and legally unsustainable. The Tribunal relied on the decision of the Hon'ble Bombay High Court in Mohd. Farhan A. Shaikh V/s DCIT, which emphasized the need for precise and specific charges in penalty notices.

d. Acceptance of Returned Income:
The Tribunal also highlighted that the returned income filed by the assessee was ultimately accepted by the revenue, and as per the Hon'ble Delhi High Court in CIT V/s SAS Pharmaceuticals, penalty under Section 271(1)(c) cannot be imposed unless there is actual concealment or non-disclosure in the income-tax return filed by the assessee.

Conclusion:
The Tribunal concluded that the penalty imposed was not sustainable in law due to the failure to frame specific charges and the acceptance of the returned income by the revenue. Consequently, the penalty was deleted, the assessee's appeal was allowed, and the revenue's appeal was dismissed.

Order:
The assessee's appeal ITA No.1732/Mum/2020 is allowed, and the revenue's appeal ITA No.2000/Mum/2020 is dismissed. The order was pronounced on 17th June 2021.