2023 (4) TMI 465 - AT - Income Tax

Penalty u/s. 271(1)(c) - Defective notice u/s 274 - Initiation of penalty on one of the limb and imposing the same on another limb of section 271(1)(c) - HELD THAT - Admittedly, in this case penalty proceedings was initiated in the assessment order for the latter limb namely furnishing inaccurate particulars of such income . Further, the notice u/s. 274 r.w.s. 271(1)(c) of the Act ( notice dated 30.12.2019) was issued for furnishing inaccurate particulars of such income . However, we noticed the penalty has been imposed vide order dated 10.02.2022 by referring to the first limb of section 271(1)(c) of the Act namely concealment particulars of income . As in the case of A.M.Shah Company 1998 (8) TMI 607 - GUJARAT HIGH COURT had held that if very basis for penalty proceedings initiated by the AO disappears, then the penalty imposed on a different footing altogether cannot be sustained. Initiating the penalty in one limb and imposing the same on another limb does not satisfy the requirement of the law - The levy of penalty has to be clear as to the limb for which it is imposed and the position in the instant case is unclear, hence, the penalty is not sustainable. Therefore, when the AO proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Not only that the penalty should be imposed under the same limb. Decided in favour of assessee.

Summary

Issues Involved:
The solitary issue in this case is whether the ld.CIT(A) was justified in confirming the imposition of penalty u/s. 271(1)(c) of the Income Tax Act amounting to Rs. 38,669.

Details of the Judgment:

Issue 1: Imposition of Penalty
The penalty proceedings were initiated under section 271(1)(c) of the Act after the reassessment was completed, and the AO imposed a penalty of Rs. 38,669. The ld.CIT(A) upheld the penalty, stating that the appellant failed to provide written submissions and details of expenses during the appellate proceedings. The ld.CIT(A) found the penalty order to be valid, as the appellant did not furnish any substantiation for its contentions. The Tribunal noted that the penalty was initiated for furnishing inaccurate particulars but was imposed for concealing particulars of income, which does not satisfy the legal requirement. Citing relevant case law, the Tribunal held that the penalty must be clear as to the limb for which it is imposed, and since the penalty in this case was unclear, it was unsustainable. Therefore, the Tribunal directed the AO to delete the penalty amount of Rs. 38,669.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, directing the deletion of the penalty imposed under section 271(1)(c) of the Income Tax Act.