2017 (1) TMI 1292 - HC - Income Tax

Penalty under Section 271(1)(c) must be based on the specific ground stated in the notice only

The Commissioner of Income Tax-11 Versus Shri Samson Perinchery

The HC held that under Section 271(1)(c), concealment of income and furnishing inaccurate particulars are distinct breaches. Penalty proceedings must be ... Penalty under Section 271 (1)(c) - difference between furnishing of inaccurate particulars of income and concealment of income - Held that:- The decision of the Supreme Court in Ashok Pai v/s. CIT [2007 (5) TMI 199 - SUPREME COURT] [relied upon in Manjunath Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] – wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice. Therefore, the issue herein stands concluded in favour of the Respondent-Assessee by the decision of the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra). - Decided against revenue Issues:Appeals challenging the deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Years 2003-04, 2004-05, 2005-06, and 2006-07.Analysis:1. Identification of the Issue:The Appeals challenge a common order by the Income Tax Appellate Tribunal which deleted the penalty imposed on the Respondent-Assessee for the mentioned Assessment Years.2. Question of Law:The main question raised in all the appeals is whether the Tribunal was justified in deleting the penalty levied under Section 271(1)(c) of the IT Act, 1961.3. Tribunal's Decision:The Tribunal deleted the penalty by distinguishing between concealment of income and furnishing inaccurate particulars of income. It emphasized that the Assessing Officer must be clear on which limb the penalty is imposed, and the penalty notice must reflect this distinction. The Tribunal also noted the non-application of mind by the Assessing Officer in issuing a standard proforma notice under Section 274 of the Act.4. Legal Precedent:The Tribunal relied on the Karnataka High Court's decision in CIT v/s. Manjunath Cotton and Ginning Factory to support its decision. The Court emphasized that concealment and furnishing inaccurate particulars of income are distinct, as upheld by various other High Courts and the Supreme Court.5. Revenue's Grievance:The Revenue contended that there is no difference between inaccurate particulars and concealment of income, arguing that the penalty deletion was unjustified.6. Supreme Court's Observation:The Supreme Court's decision in Ashok Pai v/s. CIT was cited to emphasize the distinct meanings of concealment and inaccurate particulars of income under Section 271(1)(c) of the Act. It was highlighted that the penalty must be imposed only on the ground for which the proceedings were initiated.7. Conclusion:The issue was settled in favor of the Respondent-Assessee based on the Karnataka High Court's decision. The Court found no reason to deviate from this precedent and dismissed the Appeals as they did not raise any substantial question of law.In summary, the judgment focused on the distinction between concealment of income and furnishing inaccurate particulars of income under Section 271(1)(c) of the IT Act. The Tribunal's decision to delete the penalty was supported by legal precedents emphasizing the need for clarity in initiating and imposing penalties. The Appeals were dismissed in favor of the Respondent-Assessee based on established legal principles.