Landmark Cases on Penalty

When an Assessing Officer records particulars of concealed or undisclosed income and initiates penalty proceedings under section 271(1)(c), the consequential notice under section 274 is to provide the assessee with an opportunity of being heard.

The levy of penalty under section 271(1)(c) is not permissible when a substantial question of law is framed and admitted by the High Court or Supreme Court.

Penalty under Section 270A of the Income Tax Act, 1961, cannot be imposed if the Assessing Officer fails to specify which clause under Section 270A(9) applies and fails to show cause to the assessee accordingly. Strict adherence to the conditions of Section 270A is mandatory for its applicability.

Penalty for concealment of income under Section 271(1)(c) is justified if the positive income of the assessee is reduced to nil after allowing set-off of carried forward losses of earlier years.

A protective assessment can be made, but a penalty cannot be levied on a protective basis. A penalty can only be levied after the income is assessed as concealed income in the assessment of an assessee.

Penalty under Section 271(1)(c) or 270A should not be imposed when the assessee's claim arises from a debatable legal issue or a difference in legal interpretation, provided the assessee has disclosed material facts.

Section 271AAA penalty deletion can be based on the Apex Court's decision in ACIT v. Gebilal Kanhaialal HUF (2012) 348 ITR 561, particularly when there was no specific question put to the assessee about the manner of earning undisclosed income.

Recording of satisfaction by the Assessing Officer is a prerequisite for initiating penalty proceedings under Section 271. However, this requirement is not explicitly present for penalties under Sections 271D and 271E.

Penalty proceedings under section 271(1)(c) are unsustainable if the notice issued under section 274 does not specify whether the penalty is for concealment of income or for furnishing inaccurate particulars of income.

Penalty under section 271(1)(c) cannot be levied solely on account of an addition made by the Assessing Officer if the assessee's particulars were not found inaccurate and there was no allegation of income concealment.

Penalty under section 271(1)(c) cannot be levied on additions made on an estimated basis, especially when payments for purchases were made via account payee cheques and had corresponding sales.

Penalty under section 271B is not to be imposed on co-operative societies for delayed filing of audit reports if the delay in obtaining reports from statutory auditors under the Kerala Co-operative Societies Act and Rules constitutes a reasonable cause, and the audit reports are made available before the Assessing Authority at the time of assessment finalization.

Approval under section 153D of the Income-tax Act is akin to approval under section 274(2), and the latter is considered a procedural requirement not affecting the Assessing Officer's jurisdiction to levy penalty.

A penalty under section 271(1)(c) can be levied when an assessee consciously makes a bogus claim for set-off of losses, which is plainly untenable. The levy of penalty requires the Assessing Officer to demonstrate non-application of mind or that the particulars furnished were inaccurate leading to concealment of income.

Penalty under Section 271(1)(c) is not sustainable when the income addition is made on an estimated basis without clinching material suggesting concealment or inaccurate particulars.

An assessee cannot escape penalty under section 271(1)(c) for concealed income merely because they agreed to additions after detection and filed a return in response to departmental enquiry, or made tax payments to buy peace.

A penalty notice issued under section 271(1)(c) is invalid if it does not specify whether the penalty is for concealment of income or for furnishing inaccurate particulars. This issue goes to the root of the matter and can render the entire penalty order void.

Penalty cannot be levied solely on the basis of voluntary surrender of income, especially when the department has not discharged its burden of proving concealment. If additions are made only on the basis of estimated income applying the assessee's own declared GP rate, penalty on such additional income is not leviable.

Where there is a difference between returned and assessed income, an inference of concealment arises. The assessee bears the onus to rebut this presumption, and a mere absence of a plausible explanation attracts penalty.

Penalty under section 271(1)(c) cannot be levied if a substantial question of law is framed and admitted by the High Court or Supreme Court.

A penalty notice under Section 271(1)(c) read with Section 274 does not require a specific charge or explanation of the penalty quantum, as long as the assessee is provided with the assessment order findings. The opportunity of being heard under Section 274 cannot be stretched to framing a specific charge.

Penalty under section 271(1)(c) is not leviable if the assessee did not deliberately furnish inaccurate particulars, and the concealment was not conscious.

Penalty under section 271(1)(c) cannot be imposed on additions made on an estimation basis. This applies when income is assessed based on estimated profit, especially if substantially reduced by higher authorities.

Penalty under section 271(1)(c) may not be levied if the assessee's conduct is not found to be contumacious, particularly when there is no concealment or furnishing of inaccurate particulars of income.

A penalty under Section 271D cannot be imposed after the expiry of the larger period of limitation, which is reckoned from the date of the first show cause notice for initiating penalty proceedings.

Assessment and penalty proceedings are separate and distinct. The Assessing Officer must bring material independent of the assessment to support findings of concealment or inaccurate particulars, as penalty proceedings are quasi-criminal in nature.

The assessee must produce cogent material to prove their explanation for a claim was bona fide, and making an inadmissible claim constitutes furnishing inaccurate particulars, justifying a penalty. The burden of proof is on the assessee to demonstrate they met the conditions for a deduction.

Penalty under section 271(1)(c) is not attracted where additions to income are made on an estimation basis. Such additions do not necessarily imply active concealment of income.

Penalty proceedings are vitiated if the Assessing Officer's satisfaction is not based on the order passed by the Assessing Officer or the CIT(A). The jurisdiction to impose penalty rests with the authority that is satisfied about the concealment or furnishing of inaccurate particulars of income.

Penalty proceedings are distinct from assessment proceedings, and an assessee is not barred from challenging the assessment order's findings used to levy penalty.

The charge of concealment of income and furnishing of inaccurate particulars of income may overlap. A taxpayer's conduct can be considered bonafide even if their submissions were rejected in the quantum appeal.

A penalty order under section 271(1)(c) is unsustainable if the Assessing Officer (AO) initiates proceedings for "concealment of particulars of income" but ultimately finds the assessee guilty of "furnishing inaccurate particulars of income", or vice versa. The AO cannot be uncertain in the penalty order as to which charge applies, as this error goes to the root of the matter and is not saved by section 292B.

Income disclosed in a return filed in response to a notice under section 153C, following a search, which was not disclosed in the original return, constitutes a clear case of concealment attracting penalty under section 271(1)(c). Explanation 5 to section 271(1)(c) need not be invoked in such circumstances.

Approval under Section 274(2) is a procedural requirement that does not affect the Assessing Officer's jurisdiction to levy penalty. Statutory approvals are not rendered invalid even if not explicitly recorded, provided the reasons for seeking approval are sound.

Penalty under Section 271(1)(c) is imposed only when there is a deliberate default and not a mere mistake. The furnishing of inaccurate particulars must be a deliberate attempt to evade tax, not just a mistake.

A penalty under Section 271(1)(c) of the Income Tax Act is correctly levied when an assessee admits undisclosed income during assessment proceedings, particularly when such income is discovered through search or survey operations, even if the assessee later claims to have sought a 'quietus'.

Penalty under section 271AAA is not leviable if the assessee admits undisclosed income during a search, pays tax and interest, and files a return specifying this income as business income which is accepted by the Assessing Officer.

Penalty under section 271(1)(c) cannot be automatically levied when the assessee files a revised return after a search and the Assessing Officer accepts it. The department must demonstrate that the offer of additional income was compelled by detailed discussion of documents and their explanation.

Submitting an incorrect claim in law for expenditure does not amount to furnishing inaccurate particulars for the purpose of penalty under section 271(1)(c) of the Income Tax Act.

Protective penalties cannot be levied if the substantive additions upon which they are based have been deleted.

Penalty under section 271(1)(c) cannot be levied on additions made on an estimated basis.

The imposition of penalty for concealment of income cannot be justified solely on the basis that additions were made and sustained in assessment and appellate proceedings. The penalty proceedings are distinct from assessment proceedings, and the Tribunal can delete a penalty even if additions are confirmed, if the facts justify it.

For a penalty under section 271(1)(c) to be levied, there must be a definite finding by the Assessing Officer that the assessee concealed income or furnished inaccurate particulars. The mere revision of income or addition made during assessment does not automatically warrant a penalty.

Penalty under Section 271D or 271E can be deleted if there is a reasonable cause, such as a bona fide belief and genuine transactions, that did not prejudice the revenue.

A penalty imposed for tax delinquency is a civil obligation that is remedial and coercive, and distinct from criminal punishment.

A penalty under section 271(1)(c) cannot be levied if a claim for deduction is found to be erroneous and the mistake is bona fide, as this does not amount to concealment of income.

A penalty under sections 271D and 271E cannot be imposed if the assessee acted bona fide and had a reasonable explanation, such as believing inter se transactions between partners and the firm were not governed by sections 269SS/269T, which constitutes a reasonable cause under section 273B.

A penalty under section 271(1)(c) cannot be levied if the assessee has provided all relevant material and not concealed any inaccurate particulars of income, even if a claim is not sustainable in law. The Assessing Officer must properly verify the genuineness of claims.

Penalty under section 271(1)(c) cannot be levied on income that is declared in the return of income filed by the assessee.

Penalty under section 271(1)(c) cannot be levied when additions or disallowances are made on an estimation basis during assessment.