2017 (10) TMI 1418 - AT - Income Tax

Tribunal nullifies penalties for tax assessment years, highlights specific penalty provisions

Anand Vipin Sanghavi Versus The Deputy Commissioner of Income Tax, Central Circle-2 (1), Pune.

The Tribunal set aside the penalties under Section 271(1)(c) for the assessment years 2007-08 and 2008-09 due to ambiguity in the Assessing Officer's ... Levy of penalty u/s. 271(1)(c) or u/s. 271AAA - Whether AO has wrongly recorded satisfaction for levying penalty u/s. 271(1)(c) on the charge of furnishing inaccurate particulars of income - case of ‘concealment of income’ or ‘furnishing inaccurate particulars of income’ - Held that:- In the present case, penalty u/s. 271(1) r.w.s 5A has been levied in respect of additional income offered by assessee representing investment made in the flat. AO observed that investment made for purchasing flats has not been reflected in the books of assessee. The relevant extract of the findings of Assessing Officer from order levying penalty have seen extracted above in para 9. Thus, it is a case of concealment of income. In the order levying penalty, AO has remarked that it is a case of deemed concealment of income. After having coming to conclusion that it is a case of deemed concealment, AO thereafter held that penalty u/s. 271(1)(c) has been levied on the assessee for furnishing inaccurate particulars of income. After examining the order passed u/s. 271(1) (c), we are of the view that the Assessing Officer was not clear in his understanding whether it is a case of ‘concealment of income’ or ‘furnishing inaccurate particulars of income’. Ambiguity and confusion in the mind of Assessing Officer is writ large. In assessment year 2009-10, it is an undisputed fact that due date for filing return of income u/s. 139(1) had not expired. The assessee had not filed any return of income u/s. 139(1) of the Act. The only return filed by assessee was in response to the notice u/s. 153A. The period relevant to assessment year 2009-10 is ‘specified previous year’ as defined under section 271AAA. The contention of the assessee is that in assessment year 2009-10 penalty u/s. 271(1)(c) is not leviable, if at all, penalty was be levied, it could be u/s. 271AAA of the Act. In the instant case, the date of search is 11.09.2009. The due date for filing return of income u/s. 139(1) in the present case is 30.09.2009. Undisputedly, the assessee had not filed any return of income for the relevant assessment year 2009-10. Thus, all the three conditions are satisfied. Thus, we are of considered view that previous year 2008-09 relevant to assessment year 2009-10 falls within Clause (i) of the definition of ‘specified previous year’ as given in Explanation (b) to Section 271AAA. AO has erred in invoking the provisions of section 271(1)(c) of the Act in assessment year 2009-10. - Decided in favour of assessee. Issues Involved:1. Whether the penalty under Section 271(1)(c) of the Income Tax Act, 1961, for furnishing inaccurate particulars of income or concealment of income is justified for the assessment years 2007-08 and 2008-09.2. Whether the penalty under Section 271(1)(c) is applicable for the assessment year 2009-10, given the provisions of Section 271AAA.Issue-wise Detailed Analysis:1. Penalty under Section 271(1)(c) for Assessment Years 2007-08 and 2008-09:The assessee was subjected to a search action under Section 132 of the Act on 11.09.2009, leading to the initiation of assessment proceedings under Section 153A. During the search, documents revealed an undisclosed payment of Rs. 14.25 Lakhs for booking a flat, which was not recorded in the books. The assessee admitted the payment and offered it as additional income in the returns for the relevant years. The Assessing Officer (AO) accepted these returns without further additions but initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income.The assessee argued that the penalty notices were ambiguous as they did not specify whether the penalty was for 'concealment of income' or 'furnishing inaccurate particulars of income.' The AO invoked Explanation 5A to Section 271(1)(c), indicating deemed concealment of income because the transactions were not recorded in the books. However, at different points, the AO referred to the charge as furnishing inaccurate particulars of income, showing confusion and ambiguity in the AO's mind.The Tribunal noted that 'furnishing inaccurate particulars of income' and 'concealment of income' are distinct charges with different connotations, as established by the Supreme Court in Dilip N. Shroff Vs. JCIT and T. Ashok Pai Vs. CIT. The AO's lack of clarity and the use of both charges interchangeably rendered the penalty orders unsustainable. Thus, the penalties for assessment years 2007-08 and 2008-09 were set aside.2. Applicability of Penalty under Section 271(1)(c) for Assessment Year 2009-10:For the assessment year 2009-10, the search occurred before the due date for filing the return under Section 139(1), and no return had been filed by the assessee. The Tribunal highlighted that for the relevant period, the provisions of Section 271AAA, not Section 271(1)(c), should apply. Section 271AAA pertains to penalties for undisclosed income in cases where a search is initiated after 01.06.2007.The Tribunal referred to the definition of 'specified previous year' under Section 271AAA, which includes the previous year ending before the date of the search if the return filing date has not expired and no return has been filed. Since the search date was 11.09.2009 and the due date for filing the return was 30.09.2009, the conditions for applying Section 271AAA were met. Citing the precedent set in Shri Mangesh Tupe Vs. ACIT, the Tribunal concluded that the penalty under Section 271(1)(c) was not applicable for the assessment year 2009-10, and the penalty should be levied under Section 271AAA if at all.Conclusion:The Tribunal allowed the appeals for all three assessment years, setting aside the penalties under Section 271(1)(c) for assessment years 2007-08 and 2008-09 due to ambiguity and confusion in the AO's charges. For the assessment year 2009-10, the Tribunal held that the penalty under Section 271(1)(c) was not applicable, and the provisions of Section 271AAA should have been considered.