2019 (9) TMI 900 - AT - Income Tax

Tribunal rules penalty deletion under Income Tax Act, requires clear evidence of concealment or inaccuracy

Dy. CIT-1 Kanpur Versus Smt. Shehla Ahmad And (Vice-Versa)

Dy. CIT-1 Kanpur Versus Smt. Shehla Ahmad And (Vice-Versa) - [2019] 74 ITR (Trib) 523 (ITAT [Luck]) Issues Involved:1. Deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.2. Specificity of the charge in the penalty notice under Section 274 read with Section 271(1)(c).3. Validity of the penalty based on the assessee's voluntary surrender of income.Issue-wise Detailed Analysis:1. Deletion of Penalty Imposed under Section 271(1)(c):The Revenue appealed against the deletion of a Rs. 22,00,000 penalty imposed by the Assessing Officer (AO) for undisclosed income of Rs. 67,98,770 under the head Long Term Capital Gain (LTCG). The AO had imposed this penalty based on the assessee's alleged fictitious claim of LTCG and for furnishing inaccurate particulars of income. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty, observing that the penalty proceedings are separate from assessment proceedings and that the disallowance was due to a different view taken on the same set of facts. The CIT(A) also noted that the assessee surrendered the income to avoid litigation, which does not necessarily indicate concealment of income or furnishing inaccurate particulars.2. Specificity of the Charge in the Penalty Notice:The assessee argued before the CIT(A) that the penalty order should be quashed as the AO did not specify the limb of Section 271(1)(c) under which the penalty proceedings were initiated. The CIT(A) rejected this argument, stating that the AO had used both limbs (concealment of income and furnishing inaccurate particulars) in the penalty notice. However, the CIT(A) deleted the penalty on the merits of the case, noting that the AO failed to make any further inquiry on the alleged bogus transactions and relied solely on the assessee's surrender.3. Validity of the Penalty Based on Voluntary Surrender:The assessee contended that the penalty could not be levied as the surrender of income was voluntary and made to avoid litigation. The CIT(A) agreed, citing the Supreme Court's judgment in Commissioner of Income Tax vs. Reliance Petroproducts (P) Ltd, which held that merely because a claim was not accepted does not attract penalty under Section 271(1)(c). The CIT(A) emphasized that the AO did not provide any evidence to prove that the assessee had furnished inaccurate particulars or concealed income. The CIT(A) also noted that the assessee had provided all necessary documents and evidence during the assessment proceedings, and the AO did not make any effort to rebut these during the penalty proceedings.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the penalty, agreeing that the penalty under Section 271(1)(c) can only be levied when there is clear evidence of concealment of income or furnishing inaccurate particulars. The Tribunal noted that the assessee had disclosed all material facts and that the AO failed to prove that the particulars furnished were inaccurate. The Tribunal also found no merit in the Revenue's reliance on the Madras High Court's decision in Sundaram Finance Ltd. vs. ACIT, as the deletion of the penalty was based on merits and not on any defect in the notice.Final Orders:The appeal by the Revenue was dismissed, and the cross-objection by the assessee was rejected as not pressed. The order of the CIT(A) deleting the penalty was confirmed.