2019 (7) TMI 1036 - AT - Income Tax

Tribunal cancels penalties under Income Tax Act, stressing clear charges and proper procedures.

Mr. Uttam Bhagwanrao Patil, Nawander Company, Latur, M/s. Hotel Damini, Dr. M.S. Hiremath, Shri Bhatabhai Shankar Patel, Jeetu Bhagchand Khemani, Swapnil Popatlal Shah, Rakesh Lalchand Shah Versus The Dy. Commissioner of Income Tax, The Asst. Commissioner of Income Tax, M/s. Aurangabad Electricals Ltd., The Income Tax Officer

The tribunal ruled in favor of the assessee and dismissed the Revenue's appeals regarding penalties imposed under section 271(1)(c) of the Income Tax Act. ... Penalty levied u/s 271(1)(c) - no proper satisfaction for initiating penalty proceedings and in the absence of proper show cause notice to the assessee - HELD THAT:- In number of cases in turn, relying on the ratio laid down in CIT Vs. Shri Samson Perinchery [2017 (1) TMI 1292 - BOMBAY HIGH COURT] wherein it was held that where there is no proper satisfaction for initiating penalty proceedings and in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty. In the facts of the said case, the Tribunal had deleted penalty imposed under section 271(1)(c) of the Act by holding that initiation of penalty proceedings by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty was for concealment of income. As in the present case where no charge is mentioned in assessment order, then also for non recording of proper satisfaction, the initiation of penalty proceedings is not as per law and the penalty order passed in such cases thus, cannot be upheld. Where, in some cases, penalty has been levied for non fulfillment of both limbs of section 271(1)(c) of the Act and / or for one of the limbs for initiating, for other limb for levy and in some cases, no limb is mentioned, such orders levying penalty under section 271(1)(c) of the Act cannot stand in the eyes of law. We accordingly, delete penalty levied under section 271(1)(c) of the Act - Decided in favour of assessee. Issues:- Appeal against penalty levied under section 271(1)(c) of the Income Tax Act, 1961.Detailed Analysis:1. The appeals were filed by various parties against orders of CIT(A) regarding penalty levied under section 271(1)(c) of the Income Tax Act. The common issue raised was the penalty for concealment under this section. The appeals were mainly by the assessee, challenging the penalty, while in some cases, the Revenue appealed against the CIT(A) order that deleted the penalty. The tribunal consolidated the decision due to the common issue.2. Some cases had no representation from Authorized Representatives or the assessee. However, the tribunal proceeded to decide after hearing the Departmental Representative for the Revenue. In specific appeals, delays in filing were condoned after the assessee filed applications for condonation of delay.3. The Assessing Officer initiated penalty proceedings for concealment under section 271(1)(c) during assessment. Some assessment orders did not specify the charge for the penalty, whether for concealment of income or furnishing inaccurate particulars. In certain cases, penalties were initiated for both types of defaults. There were inconsistencies in mentioning the charge and levying penalties for different limbs of the section.4. The crucial question arose regarding the validity of penalties when the Assessing Officer did not specify the charge for initiating penalty proceedings or when penalties were levied inconsistently with the initial charge. The tribunal referred to previous decisions aligning with the Bombay High Court's ruling in CIT Vs. Shri Samson Perinchery, emphasizing the importance of proper satisfaction and show cause notice for imposing penalties.5. The tribunal reiterated that penalties should be clear on which limb of section 271(1)(c) was contravened, and proper show cause notices must be given. Inconsistencies in the initiation and imposition of penalties for different limbs were deemed unlawful. The tribunal ruled that penalties lacking specific charges or based on inconsistent grounds were not sustainable in law.6. Consequently, the tribunal deleted the penalties imposed under section 271(1)(c) for all the appeals, both for the assessee and the Revenue. The decision was based on the requirement for clear charges and proper procedures in penalty proceedings, as established by legal precedents. The appeals of the assessee were allowed, while those of the Revenue were dismissed for not meeting the conditions under the Act.7. The final decision was pronounced on July 19, 2019, in favor of the assessee, allowing their appeals and dismissing those of the Revenue.