Penalty u/s 271(1)(c) : Validity if there is an iconsistency between the charge on which notice for penalty was issued and the charge on with the penalty was imposed

Short Overview : Since assessee was asked to explain penalty under section 271(1)(c) on one count, i.e., furnishing inaccurate particulars of income, whereas levy had been on other count, i.e., concealment of income, therefore, the penalty order was quashed and set aside.

Assessee assailed the imposition of penalty under section 271(1)(c) contending that it was initiated on the charge of furnishing inaccurate particulars, but AO had imposed penalty on concealment of income.

it is held that It was found that assessee was asked to explain penalty on one count, whereas levy had been on other count. This itself called for quashing of penalty order passed by AO for all years under consideration. Therefore, penalty order was quashed and set aside.

Decision: In assessee’s favour.

IN THE ITAT, DELHI BENCH

BEENA A. PILLAI, J.M. AND PRASHANT MAHARISHI, A.M.

B.R. Sharma v. ITO

ITA Nos. 5474-5476/Del/2012

29 May, 2019

Assessee by: Ajit Gandhi, C.A.

Department by: S.N. Pandey, Senior Departmental Representative

Beena A. Pillai, J.M.

Present penalty appeals has been filed by assessee against order dated 21-6-2012 passed by learned Commissioner(Appeals)-16, New Delhi for assessment years 1998-99 to 2001-02 on following grounds of appeal:

ITA No. 5474/Del/2012 assessment year 1998-99

1. The order of the Commissioner(Appeals) in confirming the levy of penalty under section 27(1)(c) amounting to Rs. 7,62,677 is arbitrary, biased, bad in law and facts and circumstances of the case.

2. That the learned Commissioner(Appeals) has grossly erred in confirming the levy of penalty under section 271(1)(c) of Rs. 7,62,677 disregarding the explanation of the appellant.

3. That the learned Commissioner(Appeals) has grossly erred in levy of penalty under section 271(1)(c) as the appellant had neither furnished inaccurate particulars of its income nor concealed its income.

4. Without prejudice to above, the learned Commissioner(Appeals) has grossly in confirming the levy of penalty on an amount of Rs. 31,88,816 whereas the alleged unexplained amount of deposit was Rs. 27,88,816 as a figure of deposit of Rs. 1,20,000 dated 15-1-1998 in bank was wrongly substituted as Rs. 5,20,000 while levying penalty.

5. That the appellant craves leave to add, alter or delete the above grounds of appeal at the time of hearing.”

ITA No. 5475/Del/2012 assessment year 1999-2000

1. The order of the Commissioner(Appeals) in confirming the levy of penalty under section 27(1)(c) amounting to Rs. 8,12,575 is arbitrary, biased, bad in law and facts and circumstances of the case.

2. That the learned Commissioner(Appeals) has grossly erred in confirming the levy of penalty under section 271(1)(c) of Rs. 8,12,575 disregarding the explanation of the appellant.

3. That the learned Commissioner(Appeals) has grossly erred in levy of penalty under section 271(1)(c) as the appellant had neither furnished inaccurate particulars of its income nor concealed its income.

4. That the appellant craves leave to add, alter or delete the above grounds of appeal at the time of hearing.”

ITA No. 5476/Del/2012 assessment year 2001-02

1. The order of the Commissioner(Appeals) in confirming the levy of penalty under section 27(1)(c) amounting to Rs. 88,688 is arbitrary, biased, bad in law and facts and circumstances of the case.

2. That the learned Commissioner(Appeals) has grossly erred in confirming the levy of penalty under section 271(1)(c) of Rs. 88,688 disregarding the explanation of the appellant.

3. That the learned Commissioner(Appeals) has grossly erred in levy of penalty under section 271(1)(c) as the appellant had neither furnished inaccurate particulars of its income nor concealed its income.

4. That the appellant craves leave to add, alter or delete the above grounds of appeal at the time of hearing.”

2. Brief facts of the case are as under:

Return of Rs. 1,76,470 was filed on 8-2-2006, in response to notice under section 148 of the Income Tax Act, 1961 (the Act). Assessment was made under section 144 on 23-3-2006 at Rs. 27,22,061.

2.1. A search was conducted in case of assessee and his family members on 8-11-2001 and information about large number of cash deposits in various Bank accounts maintained by assessee, was unearthed. Consequently, action under section 148 was initiated by recording reasons to the effect that cash credits amounting to Rs. 25,45.591 appearing in such account represented unexplained income of assessee. During course of assessment proceedings, assessee failed to comply with statutory notices issued from time to time as a result, assessment was completed based on information available on record. Assessee went in appeal against assessment order. Learned Commissioner(Appeals) vide his Order No. 36/06-07 dated 26-12-2006 confirmed assessment order.

2.2. The assessee had filed appeals with this Tribunal against quantum order passed by learned Commissioner(Appeals)-XXIV, and this Tribunal remanded appeals back to learned assessing officer for fresh assessment, as done in other group cases of assessee. It has been submitted that due to misplacement of records, said order was neither received by assessee nor by concerned Ward of Income Tax Officer and that as on date learned authorised representative submits that assessee is unable to get copy of such order by this Tribunal.

2.3. Be that as it may, learned authorised representative submitted that in the mean while, learned assessing officer issued penalty notice to assessee in respect of all assessment years under consideration. Learned assessing officer was of opinion that onus was on assessee to establish failure to return correct income did not arise from any fraud or any gross or willful neglect on his part. And since assessee failed to do so, 100% penalty on tax sought to be evaded was imposed for filing inaccurate particulars of his income.

3. Aggrieved by order of learned assessing officer, assessee preferred appeal before learned Commissioner(Appeals) who upheld view of learned assessing officer.

4. Aggrieved by order of learned Commissioner(Appeals) assessee is in appeal before us for all years under consideration on similar grounds.

5. Learned counsel before us submitted that in assessment order, penalty has been initiated for furnishing of inaccurate particulars, however, while passing final penalty order by learned assessing officer levy has been made for concealment. He submitted that even otherwise present penalty proceedings are not sustainable as all details was filed during original assessment proceedings after which proceedings under section 158 BC of the Act was initiated. He submitted that learned Commissioner(Appeals) while deciding block assessment had opined that addition made on account of unaccounted bank deposits cannot be sustained as above bank accounts were already disclosed by assessee and nothing was unearthed during course of search in respect of same.

5.1. He submitted that learned assessing officer thereafter initiated 148 proceedings in which addition was made under section 68/69 of the Act.

5.2. It has been argued by learned counsel that, merely because disallowance has been made, would not ipso facto lead to concealment or filing of inaccurate particulars of income.

5.3. On the contrary learned Senior Departmental Representative submitted that, assessee has been charged with both concealment as well as filing inaccurate particulars of income by learned assessing officer and therefore the penalty order cannot be considered to be bad in law.

5.4. He submitted that, explanation offered by assessee has not been accepted, and therefore under Explanation 1 of section 271(1)(c) of the Act, penalty levied deserves to be upheld.

6. We have perused submissions advanced by both sides in light of records placed before us.

7. In the present case, penalty has been initiated on the charge of furnishing inaccurate particulars, but learned assessing officer levied penalty on concealment of income. It is observed that assessee was asked to explain penalty on one count whereas levy has been on other count.

This itself calls for quashing of penalty order passed by learned assessing officer for all years under consideration. We, therefore, quash and set aside the penalty order so passed for all years under consideration.

Accordingly we allow the claim of assessee on the ground of legality and validity of Penalty order for all the years under consideration.

8. In the result appeals for all the assessment years i.e. 1998-99, 1999-2000 and 2001-02 are allowed.

Order pronounced in open court on 29-5-2019.