Fixing Penalty in a Casual manner is not permitted under Income Tax Law: ITAT [Read Order]

SEBI Penalty - penalty - ITAT

The New Delhi bench of the Income Tax Appellate Tribunal ( ITAT ), in Dy. Commissioner of Income-tax versus M/s National Textile Corporation Ltd ruled that fixing a charge or penalty in a casual manner is not permitted under the Income Tax law.

In instant case Assessee, A public limited company engaged in the business of manufacturing of textiles filed his return of income declaring nil income. During the scrutiny proceedings, AO made certain additions and carried penal proceedings u/s 271(1)(c) on the total foreign exchange fluctuation loss debited to the P&L account by holding that the assessee has concealed as also furnished inaccurate particulars of its income.

Assessee appealed against the proceedings of AO and the CIT (A) cancelled the penalty holding that AO failed to prove that the claim was made with false intention.

In order to press the arguments before tribunal Revenue cited various court decision regarding the levy of penalty under section 271(1)(c) of the Act. The Revenue stated that levy of such penalty can be made if two conditions like Assessee has concealed the particulars of his Income and Assessee has furnished inaccurate particulars of income is satisfied.

The revenue also added that such initiation from the part of AO with the support of any one of the said charge cannot be held bad in law.

On counterpart, the Assessee cited various case laws and submitted that penalty u/s 271 (1)(c) cannot be levied since full disclosure of income from the part of Assessee was made so that amount of foreign exchange fluctuation is being duly reflected in the Balance Sheet of the assessee noted by both AO and CIT (A).

The Assessee also pointed that AO himself is not sure even till the time of levying penalty whether he is levying the same for concealment or for furnishing inaccurate particulars.

The bench comprising H.S. Sidhu, Judicial member and L.P. Sahu, Accountant member while considering the contentions, case laws, records submitted by both the parties and held that the action of AO held to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income.

From the findings of CIT (A), the tribunal found that Assessee’s intention was not to conceal the income since it had disclosed it in the Profit and Loss account and not included while computing the taxable income.

Finally, the bench declared that it is not the fit case for levy of penalty without there being a clear specific charge.

Subscribe Taxscan Premium to view the Judgment

taxscan-loader