2023 (1) TMI 1214 - AT - Income Tax

Penalty u/s 271(1)(c) - as submitted there is a confusion in the mind of AO about which limb penalty is to be levied - as per assessee A.O. has not applied his mind and non striking of charge in the penalty notice i.e. whether the charge is for concealment of income or furnishing of in accurate particulars of income - HELD THAT - We find the Jurisdictional Hon ble High Court of Bombay in Mohd Farhan A Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT has dealt on this disputed issue of not striking off charge in the penalty notice would vitiate the penalty proceedings. Thus we are of the view that in the present case the A.O has not has not strike off the charge for levy of penalty for concealment of income or for furnishing of inaccurate particulars of income. Accordingly, we set aside the order of the CIT(A) and quash the penalty notice. And allow the grounds of appeal in favour of the assessee.

Summary

Issues:
1. Confirmation of penalty order under section 271(1)(c) of the Income Tax Act.
2. Validity of penalty notice and levy of penalty.

Analysis:
1. The appellant, a Non-Banking Financial Company, contested the order passed by the National Faceless Appeal Centre confirming the penalty under section 271(1)(c) of the Act. The disputed issue revolved around the disallowance of depreciation claimed on assets leased to various parties. The CIT(A) upheld the Assessing Officer's decision, leading to multiple appeals and orders over the years. Ultimately, the ITAT partly allowed the cross objections against the revenue appeal.

2. Subsequently, penalty proceedings were initiated by the AO under section 271(1)(c) of the Act. The AO levied a penalty after considering the scrutiny assessment findings and the explanations provided by the assessee. The appellant challenged the penalty order before the CIT(A), raising concerns about the validity of the penalty notice. The CIT(A) upheld the penalty, prompting the appellant to appeal before the ITAT.

3. During the hearing, the appellant's representative emphasized the cooperation with the AO and argued that the penalty notice was invalid. On the other hand, the Departmental Representative supported the CIT(A)'s decision. The ITAT analyzed the penalty notice and referred to a judgment by the Bombay High Court, emphasizing the importance of specifying the grounds for penalty in the notice. As the AO had not clearly indicated the charge for the penalty, the ITAT set aside the CIT(A)'s order, quashed the penalty notice, and allowed the appeal in favor of the assessee.

This comprehensive analysis highlights the legal journey of the case, focusing on the issues of penalty confirmation and the validity of the penalty notice. The ITAT's decision to quash the penalty notice underscores the significance of procedural compliance in penalty proceedings under the Income Tax Act.