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Facts
The assessee filed two appeals against the Commissioner of Income Tax (Appeals)'s orders confirming penalties under Section 271(1)(c) of the Income Tax Act for AY 2015-16 and 2016-17. The Assessing Officer initiated penalty proceedings for "furnishing inaccurate particulars of income" but levied the penalty on the distinct ground of "concealment of income."
Held
The Tribunal held that the penalty could not be sustained because the charge for which satisfaction was recorded at the initiation of proceedings ("furnishing inaccurate particulars of income") was different from the charge on which the penalty was ultimately levied ("concealment of income"). Relying on Supreme Court and High Court precedents, the Tribunal emphasized that these are distinct offenses.
Key Issues
Whether a penalty levied under Section 271(1)(c) for 'concealment of income' is valid when the satisfaction recorded for initiation of penalty proceedings was for 'furnishing inaccurate particulars of income'.
Sections Cited
Section 271(1)(c) of the Income Tax Act, 1961, Section 274 of the Income Tax Act, 1961
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Income Tax Appellate Tribunal, DELHI BENCH “D”, DELHI
Before: SHRI VIKAS AWASTHY & SHRI NAVEEN CHANDRA
ORDER PER VIKAS AWASTHY, JM: These two appeals by the assessee for AY 2015-16 & 2016-17 are directed against the orders of Commissioner of Income Tax (Appeals), Delhi 110043 (hereinafter referred to as ‘the CIT(A)’). Both the impugned orders are even date i.e. 27.03.2024 confirming levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
Since, both appeals germinate from identical set of facts, these appeals are taken up together for adjudication and are decided by this common order.
for AY 2015-16 3. Ms. Ananaya Kapoor, appearing on behalf of the assessee submitted that the Assessing Officer (AO) while passing assessment order dated 11.02.2019 has recorded satisfaction for initiation of penalty proceedings u/s. 271(1)(c) of the Act on the ground of “furnishing inaccurate particulars of income”. While levying penalty vide order dated 15.09.2021, the AO levied penalty on the limb of concealment of income. She submitted that order levying penalty is unsustainable as penalty has been levied for the reason other than the reason on which satisfaction was recorded. She further pointed that the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act dated 11.02.2019 is also vague as the AO has mentioned both the limbs of section 271(1)(c) of the Act. In support of his submissions she placed reliance on the decision in the case of CIT vs. SSA Emerald Meadows 73 taxmann.com 248 (SC) and the decision of Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory, 359 ITR 565.
Per contra, Shri Vijay B Vasanta representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee.
We have heard the submissions made by rival sides and have examined the orders of authorities below. A perusal of assessment order shows that the AO has recorded satisfaction for initiation of penalty u/s. 271(1)(c) of the Act on the charge of “furnishing inaccurate particulars of income”. However, while levying penalty vide order dated 15.09.2021, the AO has levied penalty on the charge of “concealment of income”. The Hon’ble Apex Court in the case of T. Ashok Pai vs. CIT 161 taxmann.com 340 has held that “furnishing inaccurate particulars of income” and “concealment of income” are two different expressions having different connotations and cannot be used as substitute to each other.
The Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (supra) after threadbare examining with provision of section 271(1)(c) of the Act observed that:- 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or a furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(l)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.” [Emphasized by us] 7. Similar view has been expressed by the Hon’ble Bombay High Court in the case of CIT vs Samson Perinchery, 392 ITR 4 (Bom).
Thus, in light of undisputed facts and the decisions referred above, we hold that the penalty levied u/s. 271(1)(c) of the Act in the instant case cannot be sustained as the same has not been levied on a charge for which satisfaction was recorded. In the result, impugned order is set aside and appeal of the assessee is allowed.
AY 2016-17 9. Both sides unanimously stated that the facts in appeal for AY 2016-17 are identical to facts in appeal for AY 2015-16.
On perusal of appeal file, we find that the AO while passing the assessment order has recorded satisfaction for initiation of penalty u/s. 271(1)(c) of the Act on the charge of “furnishing inaccurate particulars of income” and has levied penalty on the charge of “concealment of income”.
For the detailed reasons given while adjudicating appeal of the assessee for AY 2015-16 in the impugned order is set aside and appeal of the assessee is allowed.
In the result, both appeals of the assessee are allowed. Order pronounced in the open court on Thursday the 22nd day of August, 2024. Sd/- Sd/- (NAVEEN CHANDRA) (VIKAS AWASTHY) लेखाकार सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER िद�ी/Delhi, �दनांक/Dated 22/08/2024 NV/- �ितिलिप अ�ेिषतCopy of the Order forwarded to :
1. 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent.