2021 (7) TMI 1224 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - HELD THAT - Penalty proceedings u/s. 271(1)(c) of the Act has been initiated by the Ld. AO for concealment of income, but ultimately the penalty has been levied by the Ld. AO for furnishing inaccurate particulars of income. This is a classic case wherein penalty has been initiated under one limb of Section 271(1)(c) of the Act and ultimately levied for another limb of Section 271(1)(c) of the Act. In the case of CIT vs. Samson Perinchery 2017 (1) TMI 1292 - BOMBAY HIGH COURT had held that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act carry different meanings/connotations and therefore, the satisfaction of the AO with regard to only one of the two breaches mentioned u/s. 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. The order imposing penalty has to be made only on the ground of which penalty proceedings has been initiated, and it cannot be on a fresh ground of which the assessee has no notice. Therefore, where the Assessing Officer initiated penalty proceedings u/s. 271(1)(c) for furnishing inaccurate particulars of income, the order imposing penalty for concealment of income was not valid - we hereby direct the Ld. AO to delete the penalty levied u/s. 271(1)(c). - Decided in favour of assessee.

Summary

Issues involved:
- Confirmation of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 by the Ld. CIT(A).
- Justification of penalty imposition for furnishing inaccurate particulars of income.

Analysis:

Issue 1: Confirmation of penalty u/s. 271(1)(c) by the Ld. CIT(A)
- The appeals in ITA No. 624/Mum/2020 & 625/Mum/2020 for A.Y. 2012-13 & 2013-14 arose from the order by the Ld. CIT(A) in the matter of imposition of penalty u/s. 271(1)(c) of the Income Tax Act, 1961.
- The assessee, an individual woman deriving income from property, capital gains, and other sources, filed a belated return for A.Y. 2012-13, declaring total income. The case was selected for scrutiny to examine commodity transactions.
- The Ld. AO observed large commodity transactions not disclosed by the assessee, leading to penalty proceedings u/s. 271(1)(c) for concealment of income. However, the penalty was levied for furnishing inaccurate particulars of income.
- The Hon'ble Jurisdictional High Court held that penalty must align with the grounds on which proceedings were initiated. Penalty for concealment cannot be imposed if initiated for inaccurate particulars.
- Relying on legal precedents, the Tribunal directed the Ld. AO to delete the penalty levied for A.Y. 2012-13, as it was imposed under the wrong limb of Section 271(1)(c).

Issue 2: Justification of penalty imposition for furnishing inaccurate particulars of income
- For A.Y. 2013-14, the assessee declared losses and set off losses from commodity transactions against other income. The Ld. AO disallowed the loss and initiated penalty proceedings for furnishing inaccurate particulars of income.
- The penalty was levied for both concealment and furnishing of inaccurate particulars of income, contrary to the grounds for initiation.
- Citing legal judgments, the Tribunal directed the deletion of the penalty for A.Y. 2013-14, emphasizing that penalty imposition must align with the specific grounds on which proceedings were initiated.
- Both appeals of the assessee were allowed, and the penalties were directed to be deleted for both assessment years.

In conclusion, the Tribunal's detailed analysis highlighted the importance of aligning penalty imposition with the specific grounds for initiation, ensuring fairness and adherence to legal principles in penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.