Specific Charge of Alleged Concealment and or Furnishing of Inaccurate particulars of Income is Mandatory for Levying Penalty: ITAT [Read Order]

The Income Tax Appellate Tribunal recently in its order ruled that in order to levy penalty under section 271(1) (c) of the Income Tax Act, specific charge of alleged concealment and or furnishing of inaccurate particulars of income are mandatory.

It is held so while Judicial Member H.S. Sidhu and Accountant Member L.P. Sahu allowed the appeal of assessee. The assessee in the instant appeal is an investment company and has made investment in the shares of closely held unquoted companies.

During the assessment proceedings, the disallowances made by the AO were confirmed by the CIT (A). Thereafter, the AO issued notice u/s. 274 read with Section 271(1) (c) of the Income Tax Act, 1961 for levy of penalty. The penalty u/s. 271(1) (c) was levied of Rs. 36, 58,000/-

Aggrieved with the said penalty order, the assessee filed the appeal before the CIT (A), who vide his impugned order has upheld the penalty in dispute and accordingly, dismissed the appeal of the assessee.

Now the assessee went for an appeal before the tribunal bench of New Delhi. During the hearing it was found that the assessee had not pressed for the disallowance made on account of Bad Debts and Disallowance of Expenses on account of return of investment at the time of lower authority proceedings. So CIT (A) rejected the appeal of assessee and upheld the order of the AO.

The assessee had filed a further appeal regarding the disallowance u/s. 14A and against Long Term Capital Loss treated as Business income and the ITAT through its order had allowed the appeal of the assesse and deleted the quantum additions. However, during the penalty proceedings, the AO imposed a penalty of Rs. 36,58,000/- u/s. 271(1)(c) of the Act, in respect of total additions of Rs. 1,07,62,163/- on the alleged ground that the assessee had furnished inaccurate particulars of income.

In this behalf he filed the copy of the Tribunal’s Order in assessee’s own case and requested that penalty in dispute may be deleted, because the assessee has not furnished any inaccurate particulars of income.

After going through the rival submission and perused the records the bench ordered that AO did not record his satisfaction for initiation of penalty proceedings, because while passing the assessment order passed u/s. 143(3) (ii) of the Act, has stated that “….. Penalty proceedings u/s. 271(1) © is being initiated separately for furnishing inaccurate particulars of income / concealment income………………., which is not sufficient and therefore, the penalty proceedings cannot be said to be validly initiated under such circumstances.

Finally, the tribunal bench decided to delete the penalty in dispute and decide the issue in favor of the assessee and against the Revenue.