TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1041
X X X X Extracts X X X X
X X X X Extracts X X X X
....peals), erred in confirming levy of penalty despite the fact that the Assessing Officer failed to arrive at satisfaction during the course of assessment proceedings whether the levy of penalty u/s 271(1)(c) was for furnishing inaccurate particulars of income or for concealment of income, which constitutes the basis and foundation of the proceedings for levy of penalty, thereby making the notice dated 30.03.2014 levying penalty u/s 274 r.w.s271 of the Income Tax Act, 1961 not in accordance with the provisions of law and without application of mind on the part of the assessing officer and penalty proceedings ought to be unstainable, illegal, invalid, bad-in-law, incorrect and in gross violation of principles of natural justice. 3. On the facts and in the circumstances of the appellant company's case and in law, the Ld. Commissioner of Income Tax (Appeals), erred in confirming levy of penalty failing to consider that the notice levying penalty failed to specify as to the limb under which penalty is sought to be imposed. i.e. Assessing Officer while issuing notice has to come the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....49 taxmann.com 376 wherein it was held that since all relevant facts material to computation of total income were duly furnished by assessee no deficiency in furnishing of facts had been pointed out by Assessing Officer, deeming provision under section 271(1)(c) would not stand attracted and accordingly. penalty was to be deleted. 6. On the facts and in the circumstances of the appellant company's case and in law, the Ld. Commissioner of Income Tax (Appeals), erred in confirming levy of penalty, while failing to consider that the mere making of an unsustainable claim, by itself, does not amount to the furnishing of incorrect particulars of income ignoring the settled legal position including by the Judgment of Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) which held that where information given is not found to be incorrect, assessee cannot be held guilty of furnishing inaccurate particulars of income for the purpose of levying penalty u/s 271(1)(c). It further held that mere making a wrong claim does not amount to furnishing inaccurate particulars. 7. On the facts and in the circumstances of the appellant company's ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....apital Loss (STCL) on sale machinery of Rs. 1.06 crore. On appeal before ld. CIT(A) in quantum assessment, this disallowance was confirmed. No further appeal was filed by assessee against this disallowance. The assessing officer issued show cause notice under section 271(1)(c) read with section 274 dated 30.03.2014 for levying penalty. In response to such show cause notice, the assessee stated that their appeal is pending before ld. CIT(A). On dismissal of appeal in quantum assessment a fresh show cause notice dated 28.10.2021 was served upon the assessee through e-mail. The assessing officer levied penalty @ 100% of tax sought to be evaded on disallowance of short term capital loss. The assessing officer worked out penalty of Rs. 34,61,587/- in his order dated 20.01.2022. 4. Aggrieved by the order of penalty levied under section 271(1)(c), the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed detailed written submission. The assessee in its submission challenged the action of assessing officer on validity of levy of penalty of legal issue as well as on facts. The submission of assessee are recorded from page no. 4 to 20 of order of ld. CIT(A). The ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... accepted by revenue authority that itself will not attract penalty under section 271(1)(c). To support such view, the assessee also relied on various decisions of High Courts and different Tribunals. 5. The ld. CIT(A) after considering the submission of assessee recorded that assessee has not responded to the show cause notice issued by Assessing Officer. The case was referred for verification unit which served the notice on assessee by speed post. The assessee did not submit any reply. Such fact proves that all facts material to the computation of income were not disclosed by assessee. The explanation offered by the assessee was not convincing and acceptable, moreover, the appellant could not establish the explanation as bona fide. The ld. CIT(A) further, recorded that block of asset of machinery was not exhausted and hence question of claiming of loss does not arise. Thus, the amount of Rs. 1.06 crore was added. The ld. CIT(A) by referring the decision of Delhi High Court in CIT Vs Zoom Communication (P) Ltd. 327 ITR 510, wherein it was held that if assessee made a claim it is not only incorrect in law but without any basis and explanation furnished by him for making claim is n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 1 to section 271(1)(c). No such explanation was invoked by assessing officer either at the time of passing assessment order or issuing show cause notice. The show cause notice itself is defective, therefore, entire proceeding initiated on such show cause notice is void ab initio. The ld. AR of the assessee submits that in a series of decision, various High Courts including jurisdictional High Court in its full bench decision has held that wherein the assessing officer while issuing show cause notice without non-application of mind in not strike out inappropriate limb of charge whether it is for concealment of income or furnishing inaccurate particulars, penalty order is liable to set aside. The Mumbai Bench in a recent decision in Ramji Harakchand Shah Vs ACIT in ITA No. 5362/M/2024 dated 28.02.2025 also held that without specifying charge neither penalty can be levied nor can it be sustained. 7. In support of his submission, the ld. AR relied upon 16 decisions of different High Courts and Tribunal. However, at the time of making submission, she mainly relied upon the following decision: * Md. Farhan A. Shaikh vs DCIT (2021) 125 taxmann.com 253 (Bombay) (Full Bench); * PCIT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her the assessee concealed and the income or furnished any incorrect particular. It is an admitted fact that addition/disallowance on first appeal was upheld. It is settled position in law that penalty proceeding are separate and independent. No doubt penalty is initiated on the basis of certain additions or disallowances made in the assessment. Further, it is also settled position in the law that mere disallowance of any claim per se would not lead to levy of penalty. The language of section 271(1)(c) also suggest that penalty may be initiated on the satisfaction of assessing officer or Joint Commissioner or Commissioner (Appeal) or Principal Commissioner of Income Tax during the course of any proceeding. Thus, penalty proceedings must base on satisfaction of Income Tax Authority. The satisfaction must be recorded with cogent reasons as it is based on discretion of such authorities. Adverting to the facts of present case, we find that no specific charge was indicated in the show cause notice under section 271(1) rws 274 by assessing officer. Hence, we find convincing force in the submission of ld AR of the assessee. 11. We find that co-ordinate bench of Tribunal as well as differ....