2021 (12) TMI 755 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - Non recording mandatory satisfaction as per law - HELD THAT - Following the decisions rendered in the cases of CIT vs. Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT , CIT vs. SSA s Emerala Meadows 2016 (8) TMI 1145 - SC ORDER and Pr. CIT vs. Sahara India Life Insurance Company Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT , we are of the considered view that when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. Even the AO has failed to apply his mind at the time of recording satisfaction at the time of framing assessment to initiate the penalty proceedings u/s 271(1)(c) of the Act as to under which limb of section 271(1)(c) i.e. for concealing particulars of income or furnishing inaccurate particulars of such income, penalty proceedings have been initiated rather written vague and ambiguous satisfaction recorded that, penalty proceedings u/s 271(1)(c) are initiated . So, initiating penalty proceedings on the basis of vague and ambiguous satisfaction rather no satisfaction are bad in law and as such not sustainable. We are of the considered view that AO has failed to make out a case for furnishing of inaccurate particulars of income or concealment of particulars of income by the assessee so as to attract the provisions contained u/s 271(1)(c) of the Act. More so, when undisputedly, income has been estimated by the AO, there is no scope for concealment by the assessee so as to attract the provisions contained u/s 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
1. Appeal against penalty order u/s 271(1)(c) of the Income-tax Act, 1961 for AY 2012-13.
2. Validity of penalty imposition by the AO.
3. Specificity of charges in the penalty notice.
4. Jurisdiction and satisfaction for initiating penalty proceedings.
5. Applicability of penalty under section 271(1)(c) for inaccurate particulars or concealment of income.

Analysis:

1. The appeal sought to set aside the penalty order passed by the Commissioner of Income-tax (Appeals) affirming the penalty order u/s 271(1)(c) for AY 2012-13. The grounds included challenging the legality of the penalty imposition and lack of jurisdiction by the authorities.

2. The AO initiated penalty proceedings based on an estimated net profit, leading to a penalty of ?13,88,112. The assessee contested this, leading to the appeal before the Tribunal after the penalty was confirmed by the CIT (A).

3. The crux of the matter revolved around the specificity of charges in the penalty notice issued by the AO. The notice failed to specify whether the penalty was for concealment of income or furnishing inaccurate particulars, as required by law.

4. The Tribunal analyzed the notice issued by the AO and found it to be vague and ambiguous, lacking specificity on the grounds for initiating the penalty proceedings. This lack of clarity in the notice rendered the penalty proceedings unsustainable.

5. The Tribunal referred to previous judgments emphasizing the importance of recording a valid satisfaction and specifying the grounds for penalty imposition. It was noted that in cases where income was estimated by the AO, there was no basis for alleging concealment or furnishing inaccurate particulars by the assessee.

6. Ultimately, the Tribunal ruled in favor of the assessee, concluding that the AO failed to establish a case for penalty imposition under section 271(1)(c) due to the lack of concrete evidence of concealment or inaccurate particulars. The penalty levied by the AO was deemed unjustified and ordered to be deleted.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the Tribunal's decision regarding the penalty imposition under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2012-13.