2021 (9) TMI 237 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice - non striking inappropriate words - assessee made wrong claim in respect of taxable income thereby furnished inaccurate particulars of income and concealed its income - HELD THAT - Inappropriate words in the penalty notice has not been struck off and the notice does not specify as to under which limb of the provisions, the penalty u/s 271(1)(c) has been initiated, therefore, we are of the considered opinion that the penalty levied u/s 271(1)(c) is not sustainable and has to be deleted. Although the Ld. DR submitted that mere non-striking off of the inappropriate words will not invalidate the penalty proceedings, however, the decision of the Hon ble Karnataka High Court in the case of SSA S Emerald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT where the SLP filed by the Revenue has been dismissed by Hn ble Apex Court 2016 (8) TMI 1145 - SC ORDER is directly on the issue contested herein by the Assessee. Further, when the notice is not mentioning the concealment or the furnishing of inaccurate particulars, the ratio laid down by the Hon ble Delhi High Court in case of M/s. Sahara India Life Insurance Company Ltd 2019 (8) TMI 409 - DELHI HIGH COURT will be applicable in the present case In the present case the assessee has not furnished inaccurate particulars of income as the revised return was filed during the course of assessment proceedings before being pointed out by the AO in the notice u/s 142(1) 143(2). The assessee has claimed the statutory deductions/exemptions only. Thus, the present case is squarely covered by the Hon ble Apex Court decision 2010 (3) TMI 80 - SUPREME COURT and Section 271(1)(c) will not be attracted in the present case. Thus, the Assessing Officer was not right in imposing the penalty and the CIT(A) also ignored the crucial facts of the present case. Hence, appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Validity of the notice issued under Section 274 read with Section 271(1)(c).
3. Determination of whether the assessee furnished inaccurate particulars of income or concealed income.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act:
The assessee appealed against the order of the CIT(A) confirming the penalty of ?5,39,56,443/- imposed by the Assessing Officer under Section 271(1)(c) on the grounds of furnishing inaccurate particulars of income and concealing income. The assessee argued that the penalty was unwarranted as the revised return was filed voluntarily and not due to any notice from the AO. The assessee cited various judicial pronouncements, including the Supreme Court's decision in CIT Vs. Reliance Petro Products Pvt. Ltd., to support their claim that mere disallowance of a claim does not amount to furnishing inaccurate particulars of income.

2. Validity of the Notice Issued under Section 274 read with Section 271(1)(c):
The Tribunal noted that the notice issued under Section 274 read with Section 271(1)(c) did not specify the specific charge, i.e., whether the penalty was for concealment of income or furnishing inaccurate particulars of income. This lack of specificity rendered the notice invalid. The Tribunal referenced the Supreme Court's decision in M/s SSA’s Emerald Meadows and the Karnataka High Court's decision in CIT Vs. Manjunatha Cotton & Ginning Factory, which held that a notice must clearly specify the charge for which penalty proceedings are initiated. Consequently, the penalty notice was deemed null and void.

3. Determination of Whether the Assessee Furnished Inaccurate Particulars of Income or Concealed Income:
The Tribunal observed that the assessee had filed a revised return during the assessment proceedings, declaring an income of ?18,87,107/- and paying the corresponding taxes. The revised return was filed due to the utilization of surplus accumulated under Section 11(2) for donations to other charitable trusts, attracting the provisions of Section 11(3). The Tribunal found that the assessee had disclosed all relevant facts and made a bona fide claim. The Tribunal reiterated the Supreme Court's view in Reliance Petroproducts Pvt. Ltd., which stated that merely making an unsustainable claim does not amount to furnishing inaccurate particulars of income. Since the assessee had not concealed any facts or furnished inaccurate particulars, the penalty under Section 271(1)(c) was not justified.

Conclusion:
The Tribunal allowed the assessee's appeal, holding that the penalty imposed under Section 271(1)(c) was not sustainable. The invalidity of the penalty notice and the absence of any concealment or furnishing of inaccurate particulars of income were key factors in this decision. The Tribunal emphasized that a mere disallowance of a claim does not justify the imposition of a penalty under Section 271(1)(c). The penalty was quashed, and the appeal was allowed in favor of the assessee.