2022 (11) TMI 542 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - HELD THAT - It is pertinent to note that the notice issued under Section 271(1)(c) of the Act has not specified the limb under which penalty was imposed, therefore, the decision of the in case of SSA s Emerald Meadows 2016 (8) TMI 1145 - SC ORDER will be applicable in assessee s case. Besides this on merit the assessee has given the details of income during the proceedings u/s 153A which cannot be stated as the concealment of income or inaccurate furnishing of income. Appeal filed by the assessee is allowed. Penalty u/s 271AAA - As in the order under Section 271AAA, the Assessing Officer has simplicitery stated that the assessee failed to produce any evidence in support of his claim of business of undisclosed income and therefore, penalty u/s 271AAA will be attracted. It is pertinent to note that the notice issued by the Assessing Officer was not explaining the show-cause u/s 271AAA - assessee s reply reproduced in order under Section 271AAA explains that notices were issued in respect of Section 271(1)(c) of the Act. Thus, the decision of Hon ble Apex Court in case of SSA s Emerald Meadows (Supra) is applicable in present case. Besides this it can be seen from the Assessment Order that the assessee explained the sources of cash receipts during the course of search action under Section 132 which was recorded in statement under Section 132(4) of the Act. During the assessment proceedings, the assessee substantiated the manner in which the said income was derived through confirmations, bank statements, tax credit statements, third party ledger confirmations. So per se, Section 271AAA cannot be invoked in the present case. Thus, order under Section 271AAA related to penalty does not survive. Appeals filed by the assessee are allowed.

Issues:
1. Penalty imposed under Section 271(1)(c) for additional income offered under Section 153A of the Income Tax Act.
2. Violation of Principles of Natural Justice in penalty proceedings.
3. Application of Section 271AAA for undisclosed income.
4. Lack of mens rea in penalty proceedings.
5. Burden of proof in penalty proceedings.

Analysis:

Issue 1:
The appeals filed by the assessee challenged the penalty imposed under Section 271(1)(c) for additional income offered under Section 153A of the Income Tax Act. The Assessing Officer initiated penalty proceedings based on the additional income disclosed by the assessee. The CIT(A) upheld the penalty, leading to the appeals. The appellate tribunal considered the arguments presented by both parties. The tribunal noted that the notice issued under Section 271(1)(c) did not specify the limb under which the penalty was imposed. Citing relevant case law, the tribunal held that the penalty could not be sustained as the onus to prove concealment of income or inaccurate particulars lay with the Assessing Officer. As the assessee provided details of income during the proceedings under Section 153A, the tribunal allowed the appeal for the relevant assessment year.

Issue 2:
The additional grounds of appeal raised by the assessee highlighted the violation of Principles of Natural Justice in the penalty proceedings. The tribunal observed that the show-cause notice did not specify the grounds for the penalty under Section 271(1)(c). The tribunal, relying on case law, emphasized the importance of adherence to natural justice principles. It concluded that the penalty proceedings were vitiated due to procedural irregularities, leading to the allowance of the appeal for the respective assessment year.

Issue 3:
Regarding the application of Section 271AAA for undisclosed income, the tribunal examined the penalty proceedings initiated by the Assessing Officer. The tribunal considered the arguments presented by the assessee and the Revenue. It was noted that the Assessing Officer had not clearly specified the penalty under Section 271AAA in the show-cause notice. The tribunal emphasized the need for proper communication of penalty provisions to the assessee. Additionally, it analyzed the evidence provided by the assessee regarding the sources of cash receipts, concluding that Section 271AAA could not be invoked in the absence of proper explanation in the notice. Consequently, the tribunal allowed the appeal for the relevant assessment year.

Issue 4:
The grounds of appeal raised by the assessee also questioned the lack of mens rea in the penalty proceedings. The tribunal considered this argument along with other issues raised. It reviewed the assessment order, penalty order, and the CIT(A)'s decision. The tribunal emphasized the importance of establishing mens rea in penalty proceedings. It analyzed the facts and evidence presented, ultimately allowing the appeal for the respective assessment year.

Issue 5:
The burden of proof in penalty proceedings was a critical aspect addressed by the tribunal in its analysis. Both parties presented their arguments regarding the imposition of penalties under different sections of the Income Tax Act. The tribunal scrutinized the evidence and submissions made by the assessee and the Revenue. It highlighted the Assessing Officer's failure to establish the grounds for penalty imposition clearly. By considering relevant legal principles and the evidence provided by the assessee, the tribunal concluded that the penalties could not be sustained. As a result, all five appeals filed by the assessee were allowed by the tribunal.

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