2017 (8) TMI 639 - AT - Income Tax

Appeal allowed on penalty under Income Tax Act due to lack of specific charge

The Tribunal allowed the appeal of the assessee, setting aside the penalty imposed under section 271(1)(c) of the Income Tax Act. The Tribunal found that ... Penalty u/s. 271(1)(c) - assessee concealed the particulars of income or furnished inaccurate particulars of income - Non mentioning of specific charge - Held that:- In this case, the Assessing Officer has not brought out any specific charge for which the penalty has been imposed on the assessee under section 271(1)(c) of the Act. He has not brought out whether the assessee has concealed the particulars of income or whether the assessee has furnished inaccurate particulars of income. Even the Assessing Officer has not initiated the proceedings for any particular charge. The Assessing Officer levied penalty without mentioning any specific charge. In CIT v. Atul Mohan Bindal [2009 (8) TMI 44 - SUPREME COURT] where Hon'ble Supreme Court was considering the same provision, observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. Thus, the satisfaction of the Assessing Officer about the concealment of particulars of income or furnishing of inaccurate particulars of such income is essential before levying any penalty u/s.271(l)(c). - Decided in favour of assessee. Issues Involved:1. Validity of penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.2. Distinction between concealment of income and furnishing inaccurate particulars of income.3. Requirement of specific charge for levying penalty under section 271(1)(c).Issue-wise Detailed Analysis:1. Validity of Penalty Imposed Under Section 271(1)(c):The case pertains to the appeal filed by the assessee against the order of the CIT(A)-3, Thane, which confirmed the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) amounting to Rs. 2,28,969/-. The AO issued a notice under section 148 and completed the assessment at an income of Rs. 9,14,930/-, significantly higher than the income declared by the assessee. The AO levied the penalty by stating, 'I am therefore, fully satisfied that the assessee has concealed the particular of his income and furnished inaccurate particular of income to Rs. 8,25,000/- and committed default.' The penalty was calculated at 100% of the tax sought to be evaded, amounting to Rs. 2,28,969/-.2. Distinction Between Concealment of Income and Furnishing Inaccurate Particulars of Income:The Tribunal emphasized that section 271(1)(c) lays down two distinct charges: (i) concealment of particulars of income, and (ii) furnishing inaccurate particulars of income. Both charges are different and require clear identification. The Tribunal referred to the Hon'ble Gujarat High Court's decision in New Sorathia Engg. Co. Ltd. v. CIT, which held that it is incumbent upon the AO to state whether the penalty was being levied for concealment of particulars of income or for furnishing inaccurate particulars of income. The Tribunal also cited CIT v. Rajan & Co., which emphasized the necessity of proper application of mind and recording of at least a bare minimum opinion on the part of the AO regarding the initiation of penalty proceedings.3. Requirement of Specific Charge for Levying Penalty Under Section 271(1)(c):The Tribunal noted that the penalty proceedings and assessment proceedings are different, and the AO must clearly state the specific charge for which the penalty is being levied. In this case, the AO failed to specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. The Tribunal referred to the Hon'ble Karnataka High Court's decision in CIT v. Manjunath Cotton & Ginning Factory and the Hon'ble Bombay High Court's decision in CIT vs. Samson Perinchery, both of which held that there must be a specific charge for levying the penalty. The Tribunal also highlighted that Explanation 1 to section 271(1)(c) provides a rebuttable presumption of concealment, which is not applicable where the charge is furnishing inaccurate particulars of income.Conclusion:The Tribunal concluded that the AO did not bring out any specific charge for which the penalty was imposed under section 271(1)(c). The AO's satisfaction about the concealment of particulars of income or furnishing inaccurate particulars of such income is essential before levying any penalty. The Tribunal found that the AO was not satisfied about the concealment of particulars of income or furnishing inaccurate particulars of income on the part of the assessee. Consequently, the Tribunal deleted the penalty by setting aside the order of the CIT(A) and allowed the appeal of the assessee.Order:The appeal of the assessee is allowed. The order was pronounced in the open court on 10th August 2017.