2014 (12) TMI 844 - HC - Income Tax

Challenges to Income Tax Penalties: Appellant's Appeal Partially Successful

S. Sathyanarayanan Versus The Assistant Commissioner of Income Tax

The appellant challenged the Income Tax Appellate Tribunal's order for the assessment year 2005-06, which imposed penalties under Section 271(1)(c) for ... Additions accepted and penalty proceedings initiated u/s 271(1)(c) – Penalty proceedings initiated against deemed dividend and agricultural income - Held that:- Assessee rightly contended that the penalty proceedings u/s 271(1)(c) cannot be pursued when the plea was specifically abandoned at the first instance without reserving any right pending appeal, the orders of both the first and second appellate authorities cannot be sustained, as the point had not been considered at all - the proceedings of the CIT(A) and the Tribunal only state that the explanation offered by the assessee was not correct, meaning thereby that both the authorities went into the merits of the explanation offered by the assessee on penalty and not on the issue whether the original authority had reserved his right to proceed u/s 271(1)(c) relating to the deemed dividend - since there is no consideration by the Tribunal on the ground raised by the assessee, the matter is to be remitted back to the Tribunal to consider the scope of the second penalty order – Decided in favour of assessee. Issues Involved:- Appeal against Income Tax Appellate Tribunal order for assessment year 2005-06- Penalty imposition under Section 271(1)(c) for additions made in assessment order- Appeal against penalty imposition by Assistant Commissioner of Income Tax- Appeal before Commissioner of Income Tax (Appeals) and Tribunal- Consideration of penalty proceedings validity and jurisdictionAnalysis:1. The appellant challenged the order of the Income Tax Appellate Tribunal regarding the assessment year 2005-06, following a search operation at the premises of the appellant's father. The assessment order included various additions to the total income, which were accepted by the appellant, and tax was paid accordingly. Subsequently, penalty proceedings under Section 271(1)(c) were initiated by the Assistant Commissioner of Income Tax, leading to the imposition of penalties for specific additions. The appellant's appeals against the penalty imposition were unsuccessful, except for the addition related to agricultural income, which was allowed by the Commissioner of Income Tax (Appeals) based on similar past decisions.2. The appellant further contested the penalty imposition on deemed dividend and agricultural income additions before the Commissioner of Income Tax (Appeals) and the Tribunal. The Commissioner upheld the penalty for deemed dividend, citing lack of explanation from the appellant and satisfaction of conditions under Section 271(1)(c). The Tribunal summarily dismissed the appellant's plea, emphasizing the absence of explanations in penalty proceedings and referring to previous decisions.3. The appellant raised objections regarding the validity and jurisdiction of penalty proceedings before the Tribunal, arguing that the penalty imposition was improper due to the abandonment of a specific plea without reserving any rights. The Tribunal's order confirmed the penalty, stating the absence of explanations from the appellant and relying on case law. The High Court found merit in the appellant's contention, noting the lack of consideration by the Tribunal on the issue raised. Consequently, the matter was remanded to the Tribunal for further review in light of previous orders, allowing the appeal by way of remand.