Landmark Cases on Penalty

Section 271AAB is a self-contained provision where tax authorities have no discretion in determining penalty rates and the circumstances for attraction, with 'undisclosed income' having a specific meaning.

When an assessee discloses concealed income during a search, pays tax and interest thereon, and the department accepts the returns and passes assessment orders without disputing the manner of deriving income, penalty under section 271(1)(c) cannot be imposed.

An assessee is not liable for penalty under Section 271AAA of the Income-tax Act when no tax was payable, even if there were accounting discrepancies. This applies when the issue concerns the non-liability for penalty due to no tax payable.

Penalty under section 271(1)(c) cannot be imposed solely because an expenditure claim is disallowed. The disallowance must stem from the assessee furnishing inaccurate particulars, indicating conscious and deliberate concealment.

The Assessing Officer has discretion in levying penalty under Section 270A of the Income-tax Act, as indicated by the use of 'may' and the provision for appeal under Section 246A, necessitating an opportunity for the assessee to show cause.

Penalty notices issued under Section 274 read with Section 271(1)(c) or Section 270A of the Income Tax Act must specify the exact limb of the charge against the assessee; a general, mechanical notice stating concealment or inaccurate particulars is invalid.

Penalty under section 270A is not leviable in the absence of specifying the sub-clause of section 270A(9) under which the penalty is initiated.

The date on which the Assessing Officer writes to the Additional/Joint CIT regarding a violation attracting penalty under section 271D is to be reckoned as the date on which action for imposition of penalty was initiated, particularly in the absence of assessment orders for relevant assessment years.

Penalty imposed under section 271(1)(c) is upheld when the assessee fails to furnish any explanation before the Assessing Officer.

Furnishing inaccurate particulars of income relates to particulars that have been provided by the assessee, while concealment of income means the income has not been declared at all. The phrase 'inaccurate particulars' is broader and can include inaccuracies that lead to under-declaration or escapement of income.

Penalty is not sustainable when an addition to income is made on an estimate basis.

Penalty under section 271(1)(c) cannot be levied if the assessee made a bona fide mistake or acted upon the advice of counsel, as this does not constitute concealment of income or furnishing of inaccurate particulars.

Penalty under Section 271(1)(c) cannot be levied if the assessed total income is a minus figure or a loss, as 'total income' implies a positive figure and the relevant Explanation to Section 271(1)(c) requires computation with reference to total income.

Mentioning that penalty proceedings are initiated separately in the assessment order is sufficient for invoking penal action. The Assessing Officer needs to be satisfied that the assessee has concealed income or furnished inaccurate particulars.

Penalty for concealment of income or furnishing inaccurate particulars is not leviable when an omission from a return is due to inadvertence or ignorance, unless there is evidence of an intention to hide income. The existence of concealment or inaccurate particulars is a question of fact determined by considering all attending circumstances.

A penalty under section 271(1)(c) is not automatically imposed merely because an addition to income is sustained. The assessee must have concealed particulars of income or furnished inaccurate particulars.

Making a wrong claim for deduction or relief, when full facts are disclosed, is not equivalent to concealment of income or furnishing inaccurate particulars for the purpose of levying penalty under Section 271(1)(c). A liberal view should be taken for such claims, which are subject to scrutiny, as the threat of penalty should not deter assessees from making claims.

Penalty under Section 271(1)(c) cannot be levied if the assessee disclosed all material facts, and there was neither suppression nor misinterpretation of facts, even if the claim for special deduction was a debatable issue.

Penalty proceedings under section 271(1)(c) cannot be automatically initiated merely because an addition was made to the return of income. Making an incorrect claim in law does not amount to furnishing inaccurate particulars.

A penalty cannot be imposed until a substantive addition is made to the income of the assessee. This principle is based on the Gujarat High Court's decision in Bhailal Manilal Patel.

Share application money received in cash is not considered a loan or deposit under Section 269SS of the Income Tax Act, and therefore, penalty under Section 271D cannot be imposed for such receipts.

Penalty is leviable for deliberate deception in claiming deductions, even when cloaked as a bona fide claim. The object of section 271(1)(c) is to remedy loss of revenue.

A penalty order is liable to be quashed if the original addition to the assessee's income, which formed the basis for the penalty, has been deleted in appeal.

Explanation 5A to Section 271(1) of the Income-tax Act, 1961, is attracted when specific documents containing incriminating evidence are found during a search, and the assessee accepts the undisclosed income arising from those documents.

Penalty under section 271(1)(c) cannot be levied if the assessee had a bonafide belief regarding the particulars of income furnished and did not conceal income.

Penalty under section 271(1)(c) can be levied even when additions to income are made on an estimated basis, provided there is concealment of income.

Ignorance of law, if it amounts to a venial breach, may not justify the levy of penalty, provided the surrounding facts and circumstances indicate no guilty intention on the part of the assessee.

For imposing penalty under Section 271(1)(c) in search assessments under Section 153A, concealment of income should be assessed with reference to the additional income brought to tax over and above the income returned in response to the Section 153A notice, not the original Section 139 return.

The expression 'any other person' in Section 269SS of the Income Tax Act does not exclude directors or members of a company that has received or accepted loans or deposits.

A penalty may not be imposed if the breach of the Act is technical or venial, or if it arises from a bona fide belief that no action was required by law. The assessing officer has discretion regarding penalty imposition.