2023 (7) TMI 690 - HC - Income Tax

Penalty under section 271(1)(c) set aside for failing to specify whether concealment or furnishing inaccurate particulars was alleged

The HC set aside the penalty under section 271(1)(c), holding that the AO's penalty notice failed to state which limb-concealment of income or furnishing ... Penalty u/s 271(1)(c) - manadation of recording satisfaction which limb of the provisions of Section 271(1)(c) of the Act was triggered - whether proceedings were triggered against the respondent/assessee for concealment of income or furnishing inaccurate particulars? - Tribunal concluded, that the penalty order could not be sustained - HELD THAT:- There cannot be any dispute, that the AO failed to clearly reflect his satisfaction in the penalty notice, as to which limb of the provisions of Section 271(1)(c) of the Act was triggered vis-a-vis the respondent/assessee. As indicated above, in a given case, both limbs may get attracted, but even in such situation the AO would need to set forth his prima facie, satisfaction in the penalty notice. The reason, perhaps, why the Legislature has provided for two circumstances in Section 271(1)(c) to our minds, emanates from the need to distinguish between the gravity and consequences which may accompany concealment of particulars of income, as against a case which involves furnishing inaccurate particulars. The quantum of penalty, that the AO may levy, would depend on which slot and/or limb of Section 271(1)(c) of the Act, the assessee’s infraction falls in. No substantial of law. Issues:1. Condonation of delay in re-filing the appeal.2. Whether penalty proceedings were initiated correctly under Section 271(1)(c) of the Income Tax Act, 1961.Issue 1: Condonation of DelayAn application was filed seeking condonation of a 220-day delay in re-filing the appeal. The delay was condoned by the Court for the reasons given in the application.Issue 2: Penalty Proceedings under Section 271(1)(c)The appeal pertained to Assessment Year 2004-05 and challenged the order of the Income Tax Appellate Tribunal. The central issue was whether the penalty proceedings were flawed due to the notice failing to specify the limb of Section 271(1)(c) of the Income Tax Act under which proceedings were initiated. The Tribunal ruled in favor of the respondent, stating that the Assessing Officer did not clearly indicate whether the penalty was for concealment of income or furnishing inaccurate particulars. The Court emphasized the need for the AO to specify the limb of Section 271(1)(c) triggered against the assessee. The penalty order was set aside based on precedents emphasizing the importance of clearly indicating the basis for penalty proceedings.In conclusion, the Court found that the Assessing Officer failed to clearly reflect his satisfaction in the penalty notice regarding the specific limb of Section 271(1)(c) applicable to the respondent. The judgment highlighted the distinction between concealment of income and furnishing inaccurate particulars, emphasizing the need for the AO to specify the basis for penalty proceedings. The appeal was closed as no substantial question of law was found to arise for consideration.