2022 (6) TMI 689 - AT - Income Tax

Penalty u/s 271(1)(c) - LTCG on purchase of plot - HELD THAT - After having gone through the erroneous order passed by the lower authorities and the documents placed on record more particularly the assessment order as well as notice U/s 274 r.w.s. 271(1)(c) of the Act, we noticed that the A.O. has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. The A.O. has simply mentioned in his order with regard to initiation of penalty by stating that the assessee has concealed the income or furnishing inaccurate particulars of income by introducing non-genuine. This Tribunal in the case of M/s Vijay Kedia 2021 (8) TMI 335 - ITAT JAIPUR wherein identical issue had been decided in favour of the assessee, therefore, we are of the view that concealment of income or furnishing of inaccurate particulars of income are two different forms and they cannot be inter mixed, therefore, we quash the penalty proceedings initiated U/s 271(1)(c) of the Act. Hence, Ground of the appeal is allowed.

Issues Involved:
1. Validity of the penalty notice under section 271(1)(c) of the Income Tax Act, 1961.
2. Justification for the imposition of penalty under section 271(1)(c) for the assessment year 2010-11.

Detailed Analysis:

1. Validity of the Penalty Notice:

The primary issue raised by the assessee was the validity of the penalty notice issued under section 271(1)(c) of the Income Tax Act, 1961. The assessee argued that the notice did not specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income," which is a requirement as per judicial precedents.

The assessee relied on various judicial decisions, including the Hon'ble Karnataka High Court in the case of CIT Vs. SSA's Emerald Meadows, where it was held that a penalty notice must specify the exact charge against the assessee. The failure to do so renders the notice invalid. The Tribunal observed that the Assessing Officer (AO) had issued a standard proforma notice without striking off the irrelevant portions, thereby not clearly indicating the specific charge. This was considered a significant procedural lapse.

The Tribunal referred to the principle laid down in the case of M/s Vijay Kedia Vs. ACIT, where it was held that the penalty proceedings initiated without specifying the limb of default (concealment of income or furnishing inaccurate particulars) were invalid. Consequently, the Tribunal quashed the penalty proceedings initiated under section 271(1)(c) of the Act.

2. Justification for the Imposition of Penalty:

The second issue was whether the imposition of penalty under section 271(1)(c) was justified. The assessee contended that the incorrect claim of the cost of acquisition was an inadvertent mistake and not a deliberate attempt to conceal income or furnish inaccurate particulars. The assessee had voluntarily corrected the mistake during the assessment proceedings.

The Tribunal noted that the AO had levied the penalty on the grounds of concealing income or furnishing inaccurate particulars without specifying which limb applied. The Tribunal emphasized that concealment and furnishing inaccurate particulars are distinct defaults and cannot be interchanged. The Tribunal also considered various judicial precedents, including the Hon'ble Supreme Court's decision in Price Water House Coopers P. Ltd. Vs. CIT, which held that mere inadvertent errors do not warrant the imposition of penalty.

The Tribunal observed that the assessee had provided all relevant particulars and had corrected the mistake voluntarily. There was no evidence to suggest that the assessee had any intention to evade tax. The Tribunal concluded that the imposition of penalty was not justified in the absence of clear evidence of deliberate concealment or furnishing of inaccurate particulars.

Conclusion:

The Tribunal allowed the appeal of the assessee, quashing the penalty proceedings initiated under section 271(1)(c) of the Income Tax Act, 1961, on the grounds that the penalty notice was invalid due to the failure to specify the exact charge. Additionally, the Tribunal held that the imposition of penalty was not justified as the assessee had voluntarily corrected an inadvertent mistake without any intention to evade tax. Consequently, the penalty of Rs. 2,04,372/- was deleted.

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