Penalty under Section 271(1)(c) overturned for inconsistency in grounds. Assessee's appeals allowed.

The Tribunal found the penalty imposed under section 271(1)(c) unsustainable due to inconsistency between the initiation and imposition grounds. The penalty for the assessment year 2005-06 was set aside, and this decision applied to subsequent years, resulting in all appeals by the assessee being allowed.

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Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Difference in the grounds for initiation and imposition of penalty.
3. Validity of penalty proceedings based on concealment versus furnishing inaccurate particulars of income.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Act:
The assessee, an Executive Director of M/s. Ispat Industries Ltd., was subjected to a search action under section 132(1) of the Act. For the assessment year 2005-06, the assessee's original return filed under section 139(1) declared an income of Rs. 1,59,22,176/-, whereas the return filed in response to a notice under section 153A declared an income of Rs. 1,60,26,130/-. The difference of Rs. 1,15,951/- was due to previously unreported interest income. The Assessing Officer (AO) imposed a penalty of Rs. 39,029/- under section 271(1)(c) for this discrepancy, which was upheld by the CIT(A). The assessee argued that the omission was unintentional and due to reliance on staff for filing returns, and no incriminating material was found during the search.

2. Difference in Grounds for Initiation and Imposition of Penalty:
The assessee raised a preliminary objection that the penalty proceedings were initiated for "concealment of particulars of income," but the penalty was imposed for "furnishing inaccurate particulars of income." This discrepancy was argued to be impermissible, citing the Hon'ble Karnataka High Court's judgment in CIT vs. Manjunatha Cotton and Ginning Factory, which states that penalty proceedings initiated under one limb cannot result in a penalty under another limb.

3. Validity of Penalty Proceedings:
The Tribunal examined the AO's assessment order, which indicated that penalty proceedings were initiated for "concealment of particulars of income." However, the penalty order concluded that the assessee had "furnished inaccurate particulars of income." This inconsistency rendered the penalty proceedings invalid. The Tribunal referred to the legal principles laid down by the Hon'ble Karnataka High Court and the Hon'ble Gujarat High Court, emphasizing that the specific charge must be clear and consistent throughout the penalty proceedings to uphold the principles of natural justice.

Conclusion:
The Tribunal held that the penalty imposed under section 271(1)(c) was unsustainable due to the inconsistency between the initiation and imposition grounds. The penalty of Rs. 39,029/- for the assessment year 2005-06 was set aside. This decision applied mutatis mutandis to the appeals for assessment years 2006-07 to 2010-11, leading to the allowance of all appeals by the assessee.

Order Pronounced:
The order was pronounced in the open court on 21/10/2016, allowing all the appeals of the assessee.

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