2017 (9) TMI 661 - AT - Income Tax

Tribunal upholds deletion of penalty under Income Tax Act for lack of clarity in AO's order

The Tribunal confirmed the CIT(A)'s decision to delete the penalty under section 271(1)(c) of the Income Tax Act for unexplained investment, loan, and ... Penalty u/s 271(1)(c) - unexplained investment under section 69 - assessee during the survey u/s 133A voluntarily accepted that discrepancy in stock - AO's non surety about the charge as concealment of particulars of income or for furnishing of inaccurate particulars of income - Held that:- As referred to Para of penalty order and Para of assessment order whereby the penalty initiated and levied by the AO we are of the view that concealment is initiated and penalty is levied and the AO is not sure about the charge of levy of penalty under section 271(1)(c) of the Act. See CIT vs. Samson Perinchery [2017 (1) TMI 1292 - BOMBAY HIGH COURT ] As decided in the case of CIT vs. Baroda Tin Works [1995 (9) TMI 18 - GUJARAT High Court] is relevant wherein it was held that the fiction created under sections 68, 69,69A,69B and 69C by itself, cannot be extended to penalty proceedings to raise a presumption about concealment of such income. The Hon’ble High court has also held that once the presumption of concealment or concealed income is rebutted, it is for the department to establish that the income which the assessee is alleged to have concealed is, in fact, his income as distinguished from deemed income of the assessee which he failed to disclose in his return. In the present case of the appellant, find that effectively the penalty has been levied on the deemed income under section 69, which is not sustainable relying upon the aforesaid case laws. Hence, the penalty levied under section 271(1)(c) on this issue is deleted, and therefore, the ground of appeal is allowed. - Decided in favour of assessee. Issues:1. Deletion of penalty under section 271(1)(c) of the Income Tax Act by CIT(A)2. Jurisdiction issue raised by the assessee under rule 27 of Income Tax (Appellate Tribunal) Rules 1963Analysis:Deletion of Penalty under Section 271(1)(c) by CIT(A):The main issue in this case revolves around the deletion of the penalty under section 271(1)(c) of the Income Tax Act by the CIT(A). The Revenue appealed against the CIT(A)'s decision to delete the penalty levied by the AO on three specific items: unexplained investment towards stock discrepancy, loan received from the HUF, and bogus commission paid by the assessee. The Revenue contended that the CIT(A) erred in deleting the penalty concerning these items. However, the Tribunal found that the AO's penalty order lacked clarity on whether it was for concealment of income particulars or furnishing inaccurate particulars of income. Citing a decision by the Hon'ble Bombay High Court, it was established that the AO must be clear on the specific charge for which the penalty is imposed. The Tribunal also referenced a case law where it was emphasized that the initiation and imposition of a penalty should align on the same charge. Consequently, the Tribunal confirmed the CIT(A)'s decision to delete the penalty, as the AO's penalty initiation lacked clarity and specificity.Jurisdiction Issue under Rule 27 of Income Tax (Appellate Tribunal) Rules 1963:The assessee raised a jurisdiction issue under Rule 27 of the Income Tax (Appellate Tribunal) Rules 1963, contending that the AO had levied the penalty under section 271(1)(c) for both concealing income particulars and furnishing inaccurate particulars of income. The Tribunal observed that the AO's penalty order did not distinctly specify the charge for which the penalty was imposed, leading to ambiguity. Citing a decision by the Hon'ble Bombay High Court, the Tribunal reiterated the importance of clarity in penalty imposition and initiation. The Tribunal further highlighted that the penalty cannot be sustained if the charge is not clearly defined. Consequently, the Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision to delete the penalty based on the jurisdictional issue raised by the assessee.In conclusion, the Tribunal's detailed analysis and application of legal principles, along with referencing relevant case laws, led to the confirmation of the CIT(A)'s decision to delete the penalty under section 271(1)(c) for the specified items. The jurisdictional issue raised by the assessee under Rule 27 of the Income Tax (Appellate Tribunal) Rules 1963 played a crucial role in determining the clarity and specificity required in penalty imposition, ultimately resulting in the dismissal of the Revenue's appeal.