2021 (8) TMI 319 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - Non stuck any of the twin charges - HELD THAT - AO at the time of recording of the satisfaction did not show that how both the charges are tested for levy of penalty u/s 271(1)(c) - There may be certain circumstances where both the charges may sustain, but the AO at the time of recording satisfaction must demonstrate that how both the charges are satisfied. Even in the penalty order, such exercise has not been carried out. The issue is squarely covered in favour of the assessee by the decision in the case of SSA s Emerald Meadows 2016 (8) TMI 1145 - SC ORDER in favour of the assessee - in the case of Sahara India Life Insurance Corporation 2019 (8) TMI 409 - DELHI HIGH COURT has held in favour of the assessee. In view of this the orders of the lower authorities with respect to the levy of penalty under Section 271(1)(c) are not sustainable. Accordingly, we delete the penalty levied by the ld. Assessing Officer - Appeal of the assessee is allowed.

Summary

Issues:
Challenge against penalty under Section 271(1)(c) of the Income Tax Act, 1961 based on jurisdiction and merits.

Analysis:

1. Jurisdictional Challenge:
The appeal was filed against the penalty order under Section 271(1)(c) of the Income Tax Act, 1961. The assessee contested the penalty on grounds related to jurisdiction and the merits of the case. The case involved the assessment of an individual engaged in the taxi business who had filed a return of income showing a net profit ratio of 5.37%. The penalty proceedings were initiated due to cash deposits in the bank account that could not be fully explained by the assessee.

2. Merits of the Case:
The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars. The AO issued show cause notices to the assessee, who responded justifying the cash deposits. However, the penalty of ?1,39,050 was levied, alleging that the assessee furnished inaccurate particulars of income leading to concealment. The Commissioner of Income Tax (Appeals) upheld the penalty.

3. Judicial Analysis:
Upon review, the Tribunal found that the AO did not demonstrate how both charges of concealment and furnishing inaccurate particulars were satisfied for the penalty under Section 271(1)(c). Citing legal precedents, including a decision of the Hon’ble Supreme Court and the Hon’ble Delhi High Court, the Tribunal concluded that the orders of the lower authorities were not sustainable. The Tribunal emphasized that the AO must establish the satisfaction of both charges before levying the penalty. As such, the penalty of ?1,39,050 was deleted, and the appeal of the assessee was allowed.

4. Conclusion:
The Tribunal's decision highlighted the importance of establishing the satisfaction of charges before levying penalties under Section 271(1)(c) of the Income Tax Act. By citing relevant legal precedents, the Tribunal concluded that the penalty in this case was not justified due to the lack of proper demonstration by the Assessing Officer. The decision to delete the penalty was based on the failure to establish the grounds for penalty conclusively, leading to the allowance of the assessee's appeal.