2020 (1) TMI 155 - AT - Income Tax

Tax Tribunal Cancels Penalties for Lack of Specific Charges

M/s Coast Line Shipping (India) Pvt. Ltd. Versus Dy. Commissioner of Income Tax Central Circle – 5 (1), Mumbai

The Tribunal allowed the appeals of the assessee for A.Y. 2013-14 and 2014-15, directing the deletion of penalties under Section 271(1)(c) due to ... Penalty u/s. 271(1)(c) - non specifying specific limb of section. 271(1)(c) for violation of which Assessing Officer intents to impose penalty by striking off the inappropriate words in the show cause notice - HELD THAT:- AO did not strike off and specify the charge/limb for which he is proposing to initiate the penalty proceedings. In the assessment order Assessing Officer records that the penalty proceedings are initiated for furnishing inaccurate particulars and for concealment of income. However, in the penalty order passed U/s. 271(1)(c) of the Act the Assessing Officer records that it is a fit case for levy of penalty u/s. 271(1)(c) of the Act for furnished inaccurate particulars of income leading to concealment of income. Thus we hold that the notice issued by the AO U/s. 274 r.w.s 271(1)(c) of the Act is on account of non-application of mind and therefore the penalty proceedings initiated are bad in law. Thus, we direct the Assessing Officer to delete the penalty levied u/s. 271(1)(c) of the Act for both these appeals for the A.Y. 2013-14 and A.Y.2014-15. Penalty u/s. 271AAB - no search has been initiated u/s. 132 - HELD THAT:- As perused the Assessment Orders for the A.Y. 2013-14 and A.Y. 2014-15 and found that search and seizure operation was conducted u/s. 132 of the Act on 11.11.2014 on M/s. Geochem Laboratories Pvt. Ltd., based on which the assessments were framed in assessee’s case and nowhere in the Assessment Orders passed for the A.Y. 2013-14 and A.Y.2014-15 u/s.153C of the Act, it has been mentioned that search was initiated in assessee’s case. We also observed that penalty proceedings were initiated u/s. 271(1)(c) of the Act for the A.Y. 2013-14 and A.Y. 2014-15 in assessee case. Therefore levy of penalty u/s.271AAB the first and foremost condition to be satisfied is that search u/s. 132 of the Act should have been initiated on the assessee for invoking the provisions of section 271AAB of the Act and levying penalty under this provision. Similar view has been taken by various Tribunals as referred to above. In the case before us since there was no search and seizure operation initiated u/s. 132 of the Act, the penalty proceedings initiated u/s. 271AAB as against the provisions of statute. Thus, we quash the penalty order passed u/s. 271AAB - Decided in favour of assessee. Issues Involved:1. Sustaining levy of penalty on merits and technical grounds for A.Y. 2013-14 and 2014-15.2. Validity of penalty proceedings under Section 271AAB for A.Y. 2015-16.Detailed Analysis:1. Sustaining Levy of Penalty on Merits and Technical Grounds for A.Y. 2013-14 and 2014-15:The assessee challenged the orders of the Ld. Commissioner of Income Tax (Appeals) (Ld.CIT(A)) for sustaining the levy of penalty under Section 271(1)(c) of the Income Tax Act on both merits and technical grounds. The primary technical ground raised was that the penalty was levied without specifying the specific limb of Section 271(1)(c) for which the penalty was intended, thereby violating the principles of natural justice.The Tribunal admitted the additional legal ground raised by the assessee. The assessee's counsel argued that the notice issued under Section 274 read with Section 271(1)(c) did not specify whether the penalty was for 'concealment of income' or 'furnishing inaccurate particulars of income,' which indicated non-application of mind by the Assessing Officer (AO).The Tribunal referred to multiple judicial precedents, including:- Samson Perinchery [2017] 88 taxmann.com 413 (Bom): Held that non-striking off the irrelevant portion in the notice invalidates the penalty proceedings.- Manjunath Cotton & Ginning Factory [359 ITR 565 (Kar)]: Emphasized the necessity of specifying the charge in the penalty notice.- Dilip N. Shroff v. Joint CIT [291 ITR 519 (SC)]: Highlighted the requirement for clear and specific charges in penalty notices.The Tribunal observed that the AO did not strike off the irrelevant portion in the notice and was unclear about the charge, leading to a violation of natural justice principles. Consequently, the penalty proceedings were deemed invalid due to the lack of a specific charge.2. Validity of Penalty Proceedings Under Section 271AAB for A.Y. 2015-16:The assessee contended that the penalty order under Section 271AAB was illegal as no search was initiated under Section 132 of the Act in the assessee's case, which is a prerequisite for invoking Section 271AAB.The Tribunal examined the assessment order and penalty order and found that the search operation was conducted on M/s. Geochem Laboratories Pvt. Ltd., not on the assessee. The Tribunal noted that for invoking Section 271AAB, a search under Section 132 must be initiated on the assessee. Since no such search was conducted on the assessee, the penalty proceedings under Section 271AAB were invalid.The Tribunal referred to various decisions supporting this view, including:- DCIT v. M/s. Shreeji Corporation- DCIT v. M/s. Volga Dresses- DCIT v. Velji Rupshi Faria [2018] 172 ITD 445 (Mum. Trib)Based on these findings, the Tribunal quashed the penalty order under Section 271AAB for A.Y. 2015-16.Conclusion:The Tribunal allowed the appeals of the assessee for A.Y. 2013-14 and 2014-15, directing the deletion of penalties under Section 271(1)(c) due to non-application of mind and lack of specific charges in the penalty notices. For A.Y. 2015-16, the Tribunal quashed the penalty order under Section 271AAB, as no search under Section 132 was initiated on the assessee.