Tribunal cancels penalty for lack of specific finding on concealment vs. inaccuracy

The Tribunal allowed the assessee's appeal against the penalty imposed under section 271(1)(c) of the Income Tax Act for the Assessment year 2005-06. The Tribunal held that the penalty was not sustainable due to the lack of a specific finding by the Assessing Officer regarding whether it was imposed for concealment of income or furnishing inaccurate particulars. The penalty order was deemed inconsistent and unsustainable, leading to the cancellation of the penalty imposed by the AO.

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Issues:
- Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
1. The assessee appealed against the penalty imposed by the ld.CIT(A) under section 271(1)(c) of the Income Tax Act for the Assessment year 2005-06. The search action under section 132 revealed unexplained investments, leading to additions in the income. The ld.AO imposed a penalty of &8377; 1,80,000, which was confirmed by the CIT(A).

2. The main contention raised by the assessee was regarding the ambiguity in the penalty order. The AO did not clearly specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The assessee cited a judgment emphasizing the necessity for a clear finding in the penalty order. The AO's failure to provide a categorical conclusion was highlighted, while the Revenue authorities argued in favor of penalty for concealment of income.

3. The Tribunal referred to a judgment by the Hon’ble Gujarat High Court in a similar case, emphasizing the importance of a clear finding in the penalty order. The Court stressed that while the use of "and/or" in the notice for penalty might not be irregular, the AO must explicitly state the basis for imposing the penalty in the final order. The Tribunal analyzed the relevant paragraph of the penalty order, where the AO mentioned both concealment and furnishing inaccurate particulars without a clear distinction. This inconsistency rendered the penalty order unsustainable as per the High Court's decision.

4. Ultimately, the Tribunal concluded that the penalty was not sustainable due to the lack of a specific finding by the AO regarding whether it was imposed for concealment of income or furnishing inaccurate particulars. The appeal of the assessee was allowed, and the penalty imposed by the AO was canceled. The order was pronounced in Surat on 16th November 2018.

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