2022 (9) TMI 29 - AT - Income Tax

Penalty u/s 271(1)(c) - concealment of income v/s furnishing of inaccurate particulars of income - Whether notice issued u/s 274 did not mention specific default on which penalty was sought to be levied? - HELD THAT - AO failed to consider regarding that there is no escapement of income being which is exemption of special allowance claimed by the assessee are genuine - AO erred in finding that the income of the assessee shown by him in his return of income filed for the assessment year 2012-13 as escaped income. We observed that the exemption was claimed by the assessee on the basis of expert advice of tax professional regarding the special allowance. During the course of reassessment proceedings when the assessee came to known that the exemption was claimed incorrectly the assessee himself withdrew the claim and paid due taxes along with interest amount. We also observed that the CIT(A) has recorded the written submissions filed by the assessee during the appellate proceedings which is considered carefully and but in holding the finding of the AO is unjustified. Going through the present facts and circumstances of the case we are of the view that concealment of income is quite different from furnishing of inaccurate particulars of income. No hesitation on this point to delete the penalty and the addition made. In support, reliance was placed on the judgments referred by the AO and CIT(A) without appreciating that facts of the case are on different facts than that the assessee s case where the assessee not only provided explanation regarding the source of amount but also explained the reasons for its claim as exempt when the assessee came to know about error in return as per advice of erstwhile tax consultant and the assessee deposited the tax amount along with interest due u/s 234B 234D. CIT(A) and the AO impose the penalty is unjustifiable. Reliance was placed on the judgments in case of CIT vs. reliance Petrochemicals Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT and in case of M/s Rane Industries Pvt. Ltd. 2022 (6) TMI 1298 - ITAT PUNE where the assessee s case is similar and identical where no hesitation to delete the penalty by following precedents where the excess claim of deduction was due to bona fide and unintentional mistake. Assessee appeal allowed.

Issues Involved:
1. Validity of penalty imposed under Section 271(1)(c) of the Income Tax Act.
2. Defective notice issued under Section 274 read with Section 271(1)(c).
3. Whether the penalty was justified given the assessee's voluntary correction of the tax return.

Detailed Analysis:

1. Validity of Penalty Imposed under Section 271(1)(c):

The assessee challenged the imposition of a penalty amounting to Rs. 6,84,900/- under Section 271(1)(c) of the Income Tax Act. The primary contention was that the penalty was imposed arbitrarily and without proper consideration of the facts. The assessee argued that the penalty proceedings are separate and distinct from assessment proceedings, and the conclusions drawn in the latter should not be solely relied upon for imposing penalties.

The assessee had initially claimed a sum of Rs. 21,00,000/- as a capital receipt based on the advice of a tax consultant. This amount was later withdrawn during reassessment proceedings when the assessee's new counsel advised that the exemption was not allowable. The assessee contended that this correction was made in good faith, and there was no intention to conceal income or furnish inaccurate particulars.

2. Defective Notice Issued under Section 274 read with Section 271(1)(c):

The assessee argued that the notice issued under Section 274 was defective as it did not specify whether the penalty was for "concealing particulars of income" or "furnishing inaccurate particulars of income." The assessee cited several judicial precedents, including the Karnataka High Court's decision in the case of Commissioner of Income Tax vs. Manjunatha Cotton And Ginning Factory, which held that such notices are bad in law if they do not clearly specify the charge against the assessee.

3. Justification of Penalty Given the Assessee's Voluntary Correction:

The assessee claimed that the exemption of Rs. 21,00,000/- was initially claimed based on professional advice and was withdrawn voluntarily upon realizing the mistake. The assessee paid the due taxes along with interest, demonstrating good faith and lack of intent to deceive. The assessee cited the Supreme Court's decision in the case of M/s Price Waterhouse Coopers Pvt. Ltd. vs. Commissioner of Income Tax, where it was held that inadvertent and bona fide errors should not attract penalties under Section 271(1)(c).

The Tribunal observed that the assessee's actions were consistent with a bona fide mistake rather than an attempt to conceal income or furnish inaccurate particulars. The Tribunal also noted that the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] did not adequately consider the assessee's explanations and the legal precedents cited.

Conclusion:

The Tribunal concluded that the penalty imposed under Section 271(1)(c) was unjustified. The Tribunal emphasized that the concealment of income is different from furnishing inaccurate particulars of income. Given the facts and circumstances, including the assessee's voluntary correction and payment of taxes, the Tribunal found no grounds to uphold the penalty. The appeal was allowed, and the penalty was deleted.

Order Pronounced:

The order was pronounced in the open Court on 29/08/2022.

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