2017 (4) TMI 407 - AT - Income Tax

ITAT Mumbai quashes penalties for lack of specificity, emphasizing adherence to legal standards

Shri Anil Kumar Surekha and Smt. Nisha Anil Surekh Versus Assistant Commissioner of Income Tax Circle 3 (2), (Erstwhile ACIT CC 18 and 19)

Shri Anil Kumar Surekha and Smt. Nisha Anil Surekh Versus Assistant Commissioner of Income Tax Circle 3 (2), (Erstwhile ACIT CC 18 and 19) - TMI Issues:Confirmation of penalty u/s 271(1)(c) for multiple Assessment Years based on search & seizure action. Applicability of Explanation 5A of Section 271(1)(c) in penalty proceedings. Discrepancy between the grounds for initiating penalty and the grounds for confirming penalty. Validity of penalty proceedings due to lack of specificity in the show-cause notice. Contesting penalties for various Assessment Years by two assessees.Analysis:1. The judgment by the Appellate Tribunal ITAT Mumbai dealt with the confirmation of penalties under section 271(1)(c) for multiple Assessment Years following a search & seizure action. The appeals were against orders of the Principal Commissioner of Income Tax confirming the penalties. The Tribunal consolidated all appeals for convenience. The first case involved an assessee challenging a penalty for Assessment Year 2006-2007, imposed for furnishing inaccurate particulars of income. The penalty was confirmed by the CIT(A), citing Explanation 5A of Section 271(1)(c).2. The assessee argued that the penalty should be deleted as the returned income under section 153A was accepted without further additions, and the difference in income was due to interest on bank deposits, not intentional evasion. The penalty was initiated for concealment but imposed for furnishing inaccurate particulars, violating natural justice principles. The Tribunal agreed that the penalty proceedings were flawed due to lack of specificity in the show-cause notice, following legal precedents, and quashed the penalty.3. The Tribunal further addressed penalties imposed on the same grounds for other Assessment Years, deleting them based on the same reasoning. Another set of appeals involved penalties imposed on the wife of the first assessee for various Assessment Years, following a similar pattern of flawed penalty proceedings. The Tribunal deleted these penalties as well, maintaining consistency in its decisions.4. In conclusion, the Tribunal allowed all appeals by both assessees, emphasizing the importance of adherence to legal principles and precedents in penalty proceedings. The judgment highlighted the significance of clarity in show-cause notices and the need for penalties to be imposed in accordance with established legal standards.The judgment demonstrates the Tribunal's commitment to upholding fairness and legality in tax penalty cases, ensuring that penalties are imposed based on clear grounds and in compliance with statutory provisions and judicial precedents.