2023 (6) TMI 510 - AT - Income Tax

Levy penalty u/s 271(1)(c) - disallowance of deduction u/s 80- IB(10) and disallowance of bad debt - contention raised by assessee with respect to non-recording of satisfaction before initiating the penalty proceedings - HELD THAT - In the case of Sahara India Life Insurance Company Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT held that imposition of penalty under Section 271(1)(c) without specifying the limb i.e. whether the penalty is being imposed for concealment of particulars of income or for furnishing of inaccurate particulars of income, was not justified. In the case of SSA S Emerald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT held that the Tribunal, allowed the appeal of the assessee holding that notice issued under Section 274 r.w.s. 271(1)(c) of the Act was bad in law since the order did not specify under which limb of Section 271(1)(c), penalty proceedings had been initiated, there was no substantial question of law which arose for determination. Recording of satisfaction by Assessing Officer in relation to concealment of income or furnishing of inaccurate particulars by assessee in notice issued for initiation of penalty proceedings under section 271(1)(c) is sine qua non for initiation of such proceedings. See M/S. GOLDEN PEACE HOTELS AND RESORTS PVT. LTD. 2021 (3) TMI 195 - SC ORDER . In Goa Dourado Promotions (P.) Ltd. 2020 (1) T MI 140 - BOMBAY HIGH COURT the Bombay High Court held that recording of satisfaction by Assessing Officer in relation to concealment of income or furnishing of inaccurate particulars by assessee in notice issued for initiation of penalty proceedings under section 271(1)(c) is sine qua non for initiation of such proceedings Accordingly, we observe that since in the instant case no specific satisfaction has been recorded by the Ld. Assessing Officer either in the body of the assessment order or in the show cause notice issued u/s 271(1)(c) of the Act dated 02.05.2017 for initiation of penalty proceedings penalty imposed on the assessee under section 271(1)(c) is directed to be set-aside. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves the levy of penalty under Section 271(1)(c) of the Income Tax Act for Assessment Year 2006-07. The primary issues revolve around the correctness of the penalty imposition, specifically whether it was justified based on concealment of income or furnishing inaccurate particulars of income.

Summary:

Issue 1: Assessment and Appeal Proceedings
The appellant filed an appeal against the order passed by the Ld. Commissioner of Income Tax (Appeals)-12, Ahmedabad, upholding the penalty under Section 271(1)(c) of the Act. The appellant contested the additions made by the Assessing Officer in the assessment order, particularly regarding deduction claimed under Section 80-IB(10), bad debts, and disallowances under Section 14A of the Act.

Issue 2: Penalty Imposition
The Assessing Officer imposed the penalty under Section 271(1)(c) @ 100% of the tax sought to be evaded, alleging that the appellant willfully furnished inaccurate particulars to evade tax. The Ld. CIT(A) upheld the penalty order, emphasizing that the appellant attempted to make wrongful claims to evade tax, leading to the concealment of income.

Issue 3: Legal Contention on Non-Recording of Satisfaction
The appellant raised legal contentions regarding the non-recording of satisfaction by the Assessing Officer before initiating penalty proceedings under Section 271(1)(c) of the Act. Citing relevant case laws, the appellant argued that the absence of specific satisfaction rendered the penalty imposition invalid in law.

Judgment:
The Tribunal, after considering the contentions and legal precedents, set aside the penalty imposed on the appellant under Section 271(1)(c) of the Act. It was observed that the Assessing Officer failed to record specific satisfaction either in the assessment order or the show cause notice for initiating penalty proceedings, rendering the penalty imposition unjustified. Consequently, the appeal of the assessee was allowed, and the penalty was directed to be set aside.