2017 (3) TMI 886 - AT - Income Tax

Tribunal cancels penalty due to inconsistency in initiation and imposition

Shri Paresh S. Joshi Versus Income Tax Officer 8 (2) (4), Mumbai

Shri Paresh S. Joshi Versus Income Tax Officer 8 (2) (4), Mumbai - TMI Issues Involved:1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Difference between initiation and imposition of penalty for furnishing inaccurate particulars vs. concealment of income.3. Applicability of judicial precedents in penalty proceedings.Detailed Analysis:1. Confirmation of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:The assessee challenged the orders of the first Appellate Authority confirming the penalty imposed under Section 271(1)(c) for the assessment years 2005-06 to 2008-09. The penalties amounted to Rs. 1,45,494/-, Rs. 2,22,398/-, Rs. 2,22,899/-, and Rs. 4,59,926/-, respectively. The penalty was imposed due to the late filing of revised returns which included interest income from fixed deposits that had been auto-renewed without payouts, with TDS being deducted by the bank. The assessee argued that the revised returns were filed immediately upon realization of the interest income and before any investigation by the department, indicating no intent to evade tax.2. Difference Between Initiation and Imposition of Penalty for Furnishing Inaccurate Particulars vs. Concealment of Income:The penalty proceedings were initially initiated for furnishing inaccurate particulars of income, but the penalty was imposed for concealment of income under Explanation 1 to Section 271(1)(c). The assessee contended that Explanation 1 applies to concealment and not to furnishing inaccurate particulars, thus the penalty should not survive. The Tribunal noted that the Assessing Officer was not clear about the charge, whether it was for furnishing inaccurate particulars or for concealment of income.3. Applicability of Judicial Precedents in Penalty Proceedings:The Tribunal referred to the Supreme Court's decision in T. Ashok Pai (292 ITR 11), which emphasized that the burden of proof in penalty proceedings lies on the department to establish that the assessee had concealed income. The Supreme Court held that the omission of the word 'deliberate' in the statute does not reduce the requirement of proving a deliberate act of concealment or furnishing inaccurate particulars. The Tribunal also cited other precedents which reiterated that penalty proceedings are quasi-criminal in nature, and strict construction of the penal provisions is necessary. The Tribunal concluded that since the penalty was initiated for one reason and imposed for another, it could not be sustained.Conclusion:The Tribunal directed the Assessing Officer to delete the penalty as the initiation and imposition of the penalty were inconsistent. The appeals of the assessee were allowed, and the penalty orders were set aside. The order was pronounced in the open court on 07/03/2017.