Penalty under section 271(1)(c) cancelled due to defective notice under section 274 for joint satisfaction recording

The ITAT Jodhpur allowed the assessee's appeal against penalty under section 271(1)(c) relating to defective notice under section 274. The case involved differences between sale consideration stamp value under section 56(vii)(b) and unexplained cash credits. Following the Bombay HC full bench decision in Mohd. Farhan A. Shaikh vs. ACIT, the tribunal held that joint satisfaction for both concealment of income and furnishing inaccurate particulars was recorded in the assessment order, making the penalty proceedings defective. The penalty orders by the AO and CIT(A) were deemed erroneous and set aside.

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Issues:
Appeal against order of Learned Commissioner of Income Tax (Appeals) for Assessment Year 2015-16, Denial of condonation of delay in filing appeal, Confirmation of penalty u/s 271(1)(c) of Rs. 3,61,467/-.

Analysis:
The appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals) for Assessment Year 2015-16. The assessee raised grounds of appeal including the denial of condonation of delay in filing the appeal and the confirmation of penalty u/s 271(1)(c) of Rs. 3,61,467/-. The assessment was framed under section 143(3) of the Income Tax Act, 1961, with additions made on account of difference between sale consideration & stamp value u/s 56(vii)(b) of the Act and unexplained cash credits. Penalty proceedings were initiated under section 271(1)(c) of the Act, and the penalty order was passed against the assessee for concealing income. The appeal was dismissed by the Learned Commissioner of Income Tax (Appeals) due to a delay of four days without an application for condonation of delay by the assessee.

The assessee contended that an application for condonation of delay was filed before the Learned Commissioner of Income Tax (Appeals) and that the penalty imposition was erroneous as the satisfaction recorded by the Assessing Officer did not match the grounds for penalty in the order. The assessee sought to set aside the lower authorities' orders by deleting the penalty. The Department, however, sought dismissal of the appeal based on the lower authorities' orders.

The Tribunal analyzed the satisfaction recorded by the Assessing Officer in the assessment order for initiating penalty proceedings under section 271(1)(c) of the Act. The Tribunal referred to a full bench decision of the Hon'ble Bombay High Court (Goa) in a similar case, where it was held that a defect in the notice regarding penalty proceedings could vitiate the penalty proceedings. The Tribunal concluded that the penalty order and the confirmation of the penalty order by the Learned Commissioner of Income Tax (Appeals) were erroneous based on the joint satisfaction for "concealment of income" and "furnishing inaccurate particulars" recorded in the assessment order. Therefore, the penalty order was quashed, and the assessee's grounds of appeal were allowed.

In conclusion, the Tribunal allowed the appeal filed by the assessee against the penalty order dated 07/02/2020 for Assessment Year 2015-16.

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