2022 (10) TMI 33 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - Non specification of charge - HELD THAT - Hon'ble jurisdictional High Court in the case of Manu Engineering Works 1978 (9) TMI 18 - GUJARAT HIGH COURT while considering the question of law whether Tribunal was right or holding the order of Inspecting Assisting Commissioner of Income-tax imposing penalty under section 271(1)(c) r.w.s. 274(2) of the Act, was without jurisdiction and illegal in cancelling the same held that while issuing notice as to penalty order, it was held that it is incumbent upon the IAC to come to a positive finding as to whether there was concealment of income or whether any inaccurate particulars of such income. Hon'ble Bombay High Court in recent Full Bench decision in the case of Mohd. Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT held that whether the Assessing Officer recorded satisfaction for imposing penalty one or other or both held that primary burden lies upon the Revenue. Considering the fact that no specific charge while initiating the penalty was mentioned by the assessing officer. The Assessing Officer levied the penalty under section 271(1)(c) for furnishing inaccurate particulars, and thereafter Ld. CIT(A) confirmed the penalty on account of concealment of particulars of income. Thus, the order of lower authorities committed error in levying the penalty under section 271(1)(c). Thus, in our view the penalty order which was modified by Ld. CIT(A) the impugned order is not sustainable. Thus, the assessee succeeds on primary submission

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Legitimacy of the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Condonation of Delay:
The appeal by the assessee was filed with a delay of 920 days. The assessee contended that the delay was due to mental depression and various ailments affecting him and his family members. The Tribunal considered the medical evidence and the principle that substantial justice should prevail over technicalities, citing the Supreme Court's decision in Land Acquisition Collector Vs Mst Katiji and the Gujarat High Court's decision in Dinesh Nagin Dass Shah Vs CIT. The Tribunal found the delay to be non-malicious and condoned it, allowing the appeal to be heard on merits.

Legitimacy of Penalty under Section 271(1)(c):
The case involved the assessee's return of income for AY 2009-10, where the Assessing Officer (AO) made additions for unexplained cash deposits totaling Rs. 19,83,600/- and initiated penalty proceedings under section 271(1)(c). The AO levied a penalty of Rs. 6,20,295/- for filing inaccurate particulars of income. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty, converting the charge to 'concealment of income.'

The Tribunal examined whether the penalty was justified, focusing on two main arguments:
1. Specific Charge Requirement: The assessee argued that the AO did not specify whether the penalty was for 'concealment of income' or 'furnishing inaccurate particulars.' The Tribunal referred to judicial precedents, including the Bombay High Court's decision in Mohd. Farhan A. Shaikh vs. DCIT and the Gujarat High Court's decisions in CIT vs. Manu Engineering Works and New Sorathia Engineering Co. vs. CIT. These cases established that the AO must clearly specify the charge in the penalty notice and order.

2. Merit of Additions: The assessee claimed that the deposits were contributions from an Association of Persons (AoP), which was not accepted by the AO. The Tribunal noted that mere confirmation of additions does not automatically justify a penalty under section 271(1)(c), especially when there is a difference of opinion on the nature of the deposits.

The Tribunal concluded that the penalty order was flawed due to the lack of a specific charge and the differing reasons given by the AO and CIT(A). Hence, the penalty under section 271(1)(c) was not sustainable, and the appeal was allowed in favor of the assessee.

Conclusion:
The Tribunal condoned the delay in filing the appeal and ruled that the penalty imposed under section 271(1)(c) was invalid due to procedural lapses and lack of clear specification of the charge. The appeal was allowed, and the penalty was set aside.