2023 (11) TMI 85 - HC - Income Tax

Penalty u/s 271(1)(c) - Specific charge - Mandation of recording satisfaction regarding furnishing of inaccurate particulars of the income in the assessment order - whether failure on the part of AO to put to assessee a specific charge is fatal to the penalty proceedings, having regard to the provision of Section 271(1)(c)? - HELD THAT - A perusal of the notice would show, something which the Tribunal has also recorded, that the AO did not indicate to the respondent/assessee as to whether this was a case of concealment of particulars or furnishing inaccurate particulars or even, as indicated above, the case where both charges were sought to be levelled against the respondent/assessee. The penalty order, as a matter of fact, injects greater confusion in this behalf. There is obviously an internal inconsistency in the penalty order. The AO begins by saying that the respondent/assessee had furnished inaccurate particulars of his income in respect of disallowance of various additions made by the AO and, then, while computing the penalty that he imposed on the respondent/assessee, he goes on to say that the respondent/assessee had furnished inaccurate particulars of income or concealed income . There was obviously no clarity in the mind of the AO as to which limb of Section 271(1)(c) got attracted in the instant case for initiation, followed by imposition of penalty. ITAT was justified in law in deleting the penalty - Decided in favour of assessee.

Summary

Issues involved:
The judgment concerns the appeal against the order passed by the Income Tax Appellate Tribunal for Assessment Year 2003-04. The questions of law proposed are whether the Tribunal was justified in deleting the penalty under section 271(1)(c) of the Income Tax Act, 1961 amounting to Rs. 12,90,00,000, and whether the Assessing Officer's failure to specify the charge is fatal to the penalty proceedings.

First Issue:
The main issue in this matter is whether the Assessing Officer's failure to specify the charge against the assessee is fatal to the penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. The provision allows for penalty for concealment of income or furnishing inaccurate particulars. The AO initiated penalty proceedings stating that the assessee failed to disclose true particulars of income, but the subsequent notice did not clearly indicate whether it was a case of concealment or furnishing inaccurate particulars.

Second Issue:
The second issue revolves around the confusion in the penalty order regarding whether the assessee furnished inaccurate particulars of income or concealed income. The penalty order shows inconsistency as it initially mentions inaccurate particulars but later refers to both inaccurate particulars and concealed income. This lack of clarity in the imposition of penalty under Section 271(1)(c) raises questions about the validity of the penalty proceedings.

Third Issue:
The third issue questions whether the ITAT failed to consider the revenue's case that the assessee failed to furnish true particulars of income, justifying the levy of the penalty. The judgment cites various cases where the Delhi High Court emphasized the importance of clearly indicating the specific charge when initiating penalty proceedings under Section 271(1)(c) of the Act.

In conclusion, the judgment highlights the significance of clarity in specifying the charges under Section 271(1)(c) of the Income Tax Act to ensure the validity of penalty proceedings. The lack of clarity in the penalty order and notice issued by the Assessing Officer can lead to confusion and raise doubts about the imposition of penalties. The judgment emphasizes the need for precise communication of charges to the assessee to uphold the integrity of penalty proceedings.