2023 (11) TMI 852 - AT - Income Tax

Penalty u/s. 271(1)(c) - Defective notice u/s 274 - Difference in charge for levying penalty in SCN and as per impugned penalty order - whether to levy penalty on concealment of Income or furnishing of inaccurate particulars of Income ? - as per assessee AO levied penalty for furnishing inaccurate particulars of income whereas in the notice issued section 274 Appellant was asked to show cause why penalty should not be levied for concealing particulars of income - HELD THAT - It is clear that while the Assessment Order records satisfaction of the AO that the Appellant has furnished inaccurate particulars of income, the notice issued under Section 274 of the Act state that the Appellant has been charged with concealment of particulars of income. However, while passing the penalty order, penalty has been levied on the Appellant for furnishing inaccurate particulars of income. Penalty notices put the Appellant to notice about the charge of concealment of particulars of income whereas in the impugned penalty order penalty under Section 271(1)(c) of the Act has been levied for furnishing inaccurate particulars of income. Thus, the Appellant has not been informed about the charge/grounds on which penalty under Section 271(1)(c) of the Act is sought to be levied through statutory notice issued under Section 274 of the Act and therefore, the test laid down by the Hon ble Bombay High Court in the case of Mohd. Farhan A Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT is not satisfied. Since, in the present case the penalty proceedings were initiated under one limb of Section 271(1)(c) for furnishing inaccurate particulars of income whereas the penalty has been levied after finding the Appellant guilty under the other limb of Section 271(1)(c) for furnishing inaccurate particulars of income, the penalty order levying penalty u/s 271(1)(c) of the Act cannot be sustained - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the penalty order under Section 271(1)(c) of the Income Tax Act, 1961.
2. Merits of the penalty levied under Section 271(1)(c) of the Act.

Summary:

Issue 1: Validity of the Penalty Order under Section 271(1)(c)
The Appellant challenged the penalty order dated 29/06/2018, confirmed by the CIT(A) on 17/03/2023, arguing that the Assessing Officer (A.O.) was unsure whether to levy the penalty for "concealment of income" or "furnishing of inaccurate particulars of income." The Appellant contended that this ambiguity renders the penalty order void ab initio. The Tribunal observed that the Assessment Order recorded satisfaction for initiating penalty proceedings for furnishing inaccurate particulars of income, while the notice issued under Section 274 of the Act charged the Appellant with concealment of particulars of income. However, the penalty order ultimately levied the penalty for furnishing inaccurate particulars of income. Citing judicial precedents, including the Full Bench judgment of the Hon'ble Bombay High Court in the case of Mohd. Farhan A Shaikh, the Tribunal held that the penalty order is bad in law due to the discrepancy between the charge in the notice and the penalty order. Consequently, the penalty order dated 29/06/2018, levying a penalty of INR 55,34,03,602/-, was quashed.

Issue 2: Merits of the Penalty Levied under Section 271(1)(c)
Given the Tribunal's decision to quash the penalty order on legal grounds, the contentions regarding the merits of the penalty were rendered academic and were not adjudicated upon. The Tribunal left these contentions open for consideration in any future proceedings.

Conclusion:
The appeal was allowed on the ground that the penalty order was bad in law due to the inconsistency between the charge stated in the notice and the penalty order. The Tribunal quashed the penalty order without addressing the merits of the penalty.