Penalty under Income Tax Act overturned for lack of specific charges

The Tribunal concluded that the penalty imposed under Section 271(1)(c) of the Income Tax Act was not sustainable due to the failure to frame specific charges and the acceptance of the returned income by the revenue. As a result, the penalty was deleted, the assessee's appeal was allowed, and the revenue's appeal was dismissed. The order was pronounced on 17th June 2021.

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Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Delay in filing appeals by both the assessee and the revenue.
3. Legality of the penalty imposed due to alleged concealment of income and furnishing of inaccurate particulars.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The primary issue in the cross-appeals is the imposition of penalty under Section 271(1)(c) of the Income Tax Act. The Assessing Officer (AO) imposed a penalty of Rs. 104.64 Lacs, calculated at 200% of the tax sought to be evaded by the assessee. Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] reduced the penalty to 100% of the tax sought to be evaded, amounting to Rs. 52.32 Lacs. Both the revenue and the assessee have contested this decision, leading to the current cross-appeals.

2. Delay in Filing Appeals:
The registry noted a delay of 101 days in the assessee's appeal, which was attributed to the late receipt of the physical order and the Covid-19 lockdown. The delay was condoned based on principles laid down by the Hon'ble Supreme Court in Collector, Land Acquisition V/s Mst. Katiji. Similarly, a delay of 210 days was noted in the revenue's appeal, but it was filed within the extended time as per the Gazette of India notification, and thus, the delay was also condoned.

3. Legality of the Penalty Imposed:
a. Factual Background:
The penalty arose from an assessment framed against the assessee for AY 2013-14, where an additional income of Rs. 175 Lacs was offered by the assessee after cash was seized from an employee of Ryan International School. The assessee admitted that the cash belonged to him and included it in his return of income, which was accepted by the AO.

b. Legal Grounds:
The assessee argued that there was no concealment or furnishing of inaccurate particulars since the returned income was accepted by the AO. The revenue contended that the disclosure was made only because the cash was seized, implying that it would not have been declared otherwise.

c. Tribunal's Findings:
The Tribunal noted that the penalty was initiated under both Section 271AAB and Section 271(1)(c), but the specific charge was not framed clearly. The AO failed to specify whether the penalty was for concealment of income or furnishing inaccurate particulars, rendering the penalty proceedings vague and legally unsustainable. The Tribunal relied on the decision of the Hon'ble Bombay High Court in Mohd. Farhan A. Shaikh V/s DCIT, which emphasized the need for precise and specific charges in penalty notices.

d. Acceptance of Returned Income:
The Tribunal also highlighted that the returned income filed by the assessee was ultimately accepted by the revenue, and as per the Hon'ble Delhi High Court in CIT V/s SAS Pharmaceuticals, penalty under Section 271(1)(c) cannot be imposed unless there is actual concealment or non-disclosure in the income-tax return filed by the assessee.

Conclusion:
The Tribunal concluded that the penalty imposed was not sustainable in law due to the failure to frame specific charges and the acceptance of the returned income by the revenue. Consequently, the penalty was deleted, the assessee's appeal was allowed, and the revenue's appeal was dismissed.

Order:
The assessee's appeal ITA No.1732/Mum/2020 is allowed, and the revenue's appeal ITA No.2000/Mum/2020 is dismissed. The order was pronounced on 17th June 2021.

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