2024 (9) TMI 1626 - AT - Income Tax

Penalty u/s 271(1)(c) - addition on account of short credit of sale consideration received from the sale of copy rights and cable rights - non specification of clear charge - concealment of income v/s furnishing inaccurate particulars of income - whether the penalty under section 271(1)(c) is sustainable in the light of the procedural lapse raised by the assessee? - HELD THAT - It is settled position of law that in the penalty proceedings under section 271(1)(c), AO must clearly specify whether the penalty is being levied for concealment of income or furnishing inaccurate particulars of income. In the present case, notice issued u/s 274 r.w.s. 271(1)(c) does not specify the nature of default. Several judicial precedence have held that when the charge is not clearly specified in the penalty notice, the penalty proceedings are rendered invalid. Hon ble Supreme Court in the case of CIT Anr, -vs.- M/s SSA s Emerald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT and in the case of Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT have held that vague notice u/s 274 rendered the penalty proceedings are void ab initio. In the present case, AO failed to specify the exact charge whether concealment of income or furnishing inaccurate particulars of income, which is clearly procedural lapse, since the penalty proceedings initiated without clarify on this issue. The imposition of penalty cannot be sustained. Even on merits, the addition sustained by the CIT(Appeals) related to disputed adjustment of sale consideration of copy rights and cable rights. There is no finding that the assessee deliberately concealed its income or furnished inaccurate particulars of income. The explanation officered by the assessee appears to be bonafide one and there is no evidence suggests the malafide intention on the part of assessee. Appeal of the assessee is allowed.

Summary

Issues:
1. Imposition of penalty under section 271(1)(c) for alleged concealment of income or furnishing inaccurate particulars of income.

Analysis:
The judgment involves an appeal by the assessee against the imposition of a penalty under section 271(1)(c) of the Income Tax Act, 1961. The assessee, a company engaged in the business of entertainment and media, was subjected to penalty proceedings by the Assessing Officer for an addition made on account of short credit of sale consideration received from the sale of copyrights and cable rights. The Assessing Officer imposed a penalty of Rs. 16,03,200 under section 271(1)(c) based on sustained additions in the assessment. The primary contention raised by the assessee was the improper initiation of penalty proceedings, arguing that the exact charge for the penalty was not specified, rendering the penalty proceedings invalid. The assessee claimed that there was no concealment of income or furnishing of inaccurate particulars of income. The case revolved around whether the penalty under section 271(1)(c) was sustainable due to procedural lapses and lack of clarity in specifying the nature of the default in the penalty notice.

The Tribunal analyzed the contentions of both parties and reviewed the procedural aspects of the penalty imposition. It was highlighted that in penalty proceedings under section 271(1)(c), the Assessing Officer must clearly specify whether the penalty is for concealment of income or furnishing inaccurate particulars of income. Citing judicial precedents, the Tribunal emphasized the importance of a specific charge in the penalty notice. The Tribunal noted that the notice issued in this case did not clearly specify the nature of the default, which was considered a procedural lapse. Additionally, on the merits of the case, the Tribunal found that the addition sustained by the lower authorities was related to a disputed adjustment of sale consideration, without any evidence of deliberate concealment or furnishing inaccurate particulars of income by the assessee. The Tribunal concluded that the explanation provided by the assessee was bona fide, and there was no indication of malafide intent. Therefore, considering the failure to specify the exact charge in the penalty notice and the lack of evidence supporting concealment or furnishing inaccurate particulars of income, the Tribunal held that the penalty imposed under section 271(1)(c) was not sustainable.

Consequently, the Tribunal set aside the penalty imposed by the Assessing Officer and deleted the penalty under section 271(1)(c). The appeal of the assessee was allowed, and the penalty was dismissed. The judgment was pronounced in the open court on 26/09/2024.