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Facts
The Assessee claimed a relief under Section 90 of the Income Tax Act for ESOPs, which was disallowed by the Assessing Officer (AO) during assessment proceedings. Subsequently, the AO initiated penalty proceedings for furnishing inaccurate particulars of income.
Held
The Tribunal held that there was a mismatch in the limbs of Section 271(1)(c) of the Act concerning the initiation of penalty proceedings and the penalty order. The AO did not come to a clear finding on whether there was concealment of income or furnishing of inaccurate particulars.
Key Issues
Whether the penalty levied under Section 271(1)(c) of the Act is sustainable when there is a mismatch in the stated grounds for penalty initiation and imposition.
Sections Cited
90, 17, 271(1)(c), 274, 250, 143(3), 90A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI “I” BENCH, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI OMKARESHWAR CHIDARA, AM
आदेश / O R D E R PER NARENDER KUMAR CHOUDHRY:
This appeal has been preferred by the Assessee against the order impugned herein, passed by the National Faceless dated 17.05.2024 Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short 'the Act') for the A.Y. 2013-14.
In the instant case, the Assessee by filing its return of income on dated 28.08.2023 declared total income at Rs.78,50,014/- including ESOP perquisite value of Rs. 72,84,320/- and claimed the refund to the tune of Rs.21,46,410/-. The Assessee also claimed the relief amounting to Rs.20,44,855/- u/s 90 of the Act, as observed by the Assessing Officer (AO) from the schedule TR of the ITR-2 submitted on dated 09.10.2014 during the course of scrutiny proceedings and therefore in order to verify, the statutory notices were issued to the Assessee and ultimately the assessment was completed u/s 143(3) of the Act by passing assessment order dated 31.03.2016, whereby the relief claimed u/s 90 of the Act on account of employees' stock option to the tune of Rs. 20,44,855/- as per section 17 of the Act and/or Double Taxation Avoidance Agreement between India and UAE (DTAA) has been disallowed.
The Assessee, being aggrieved, challenged the said addition before the then CIT(A), who vide order dated 19.01.2019 upheld the said addition and therefore then Assessee further challenged the decision of the Ld. Commissioner before the Tribunal.
Thereafter, the AO initiated the penalty proceedings by issuing the notice dated 25.03.2019 for levy of penalty u/s 271(1)(c) of the Act qua aforesaid addition/disallowance.
The Assessee vide letter dated 27.03.2019 explained the facts of the case and requested the AO to keep the penalty proceedings in abeyance till the order of the Tribunal is received in the matter.
The AO did not agree with the claim of the Assessee and vide penalty order dated 31-03-2019 ultimately levied the penalty to the tune of Rs.20,44,855/- u/s 271(1)(c) of the Act.
The Assessee being aggrieved challenged the levy of penalty u/s 271(1)(c) of the Act, before the Ld. Commissioner and raised various issues on merit as well as on legal aspects, but could not succeed, as the Ld. Commissioner vide impugned order affirmed the levy of penalty, by dismissing the appeal of the Assessee.
The Assessee has challenged the impugned order before this Court and at the outset, has claimed that the AO vide assessment order dated 31.03.2016 for the assessment year under consideration, denied the Assessee's claim u/s 90A of the Act on account of ESOP requisite to the tune of Rs.20,44,855/- and recorded the satisfaction and simultaneously initiated the penalty proceeding for furnishing inaccurate particulars of income and concealing the taxable income. Thereafter the AO issued a show cause notice of penalty proceedings u/s 271(1)(c) of the Act by highlighting the limb i.e. concealment of particulars of income. Thereafter the AO issued another notice dated 25.03.2019 for penalty proceedings u/s 271(1)(c) of the Act but without mentioning any of the limbs as specified u/s 271(1)(c) of the Act. The AO thus therefore vide penalty order dated 31.03.2019 ultimately levied the penalty of Rs.20,44,855/- u/s 271(1)(c) of the Act by holding that the Assessee has furnished inaccurate particulars of income and has committed a clear default within the meaning of section 271(1)(c) of the Act read with explanation (1) to that section. The Assessee therefore has claimed that the AO himself was not sure with regard to the limb of the penalty starting from the recording of the satisfaction in the assessment order and/are initiating the penalty proceedings through the assessment order and issuing the penalty. notice dated 31.03.2016 and thereafter on 25.03.2019 and thereafter passing the penalty order and ultimately passed the penalty order dated 31.03.2019 imposing the penalty for furnishing of inaccurate particulars of income as against specified/highlighted limb i.e. concealment of particulars of income in the penalty notice dated 31.03.2016.
The Ld. D.R. on the contrary refuted the claim of the Assessee.
Heard the parties and perused the material available on record. From the submissions of the parties and analyzations made above, it goes to show that while initiating the penalty proceedings through assessment order and issuing the main/first notice dated 25.03.2019 and thereafter the penalty order dated 31.03.2019 there are mis- matches in the limbs of the provisions of section 271(1)(c) of the Act. Admittedly, both the limbs are distinct from each other and having its own connotations. The Hon'ble Jurisdictional High Court in the case of CIT vs. Samson Perinchery (supra) while respectfully following the judgement rendered by Hon'ble Apex Court in the case of T. Ashok Pai vs. CIT (supra), has also clearly held that concealment of income and furnishing of inaccurate particulars of income are two separate connotations. Further, the Hon'ble Gujarat High Court in the case of CIT Vs. Manu Engineering Works (122 ITR 306) has also clearly laid down the principle that it is incumbent upon the AO to come to a positive finding "as to whether there was concealment of income or furnishing of inaccurate particulars of income". In the absence of such clear-cut findings, the penalty order is liable to be struck off.
On the aforesaid analyzations, we are of the considered view that where there is confusion in recording the satisfaction for initiation of penalty proceedings or issuing the notice u/s 274 of the Act or levy of penalty on the limb for which no satisfaction was recorded and no penalty proceedings were initiated in the assessment order, then the penalty levied is un-sustainable. Thus, on the aforesaid analyzations, the penalty under consideration is unsustainable and therefore the same is deleted.