Absence of Continuity in action of AO and CIT(A): ITAT deletes Penalty imposed without sure about nature of Default [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench deleted the penalty imposed without sure about the nature of default thus the bench observed absence of continuity in action of the assessing officer and Commissioner of Income Tax (Appeals) {CIT(A)} imposed the penalty.

Assessee, Sheetal Mehra filed the appeal by challenging the action of the CIT(A) confirming the penalty of Rs.2,16,133/- levied under Section 271(1)(c) of the Income Tax Act, 1961 by the Assessing Officer.

During the hearing, it was pointed out that while initiating the penalty proceedings under Section 271(1)(c) of the Income Tax Act, the Assessing Officer formed ‘satisfaction’ towards Concealment of Particulars of Income towards alleged unexplained cash deposits in question.

Then, the Assessing Officer has imposed a penalty on a different premise i.e. furnishing inaccurate particulars of income.

Further, it is apparent that the basis and foundation for imposition of penalty has been altered by AO himself while imposing the penalty. Thus, the original satisfaction for imposition of penalty has been altered and modified firstly by the AO and thereafter by the CIT(A).

It was observed by the tribunal that the imposition of penalty is solely dependent upon the initial ‘satisfaction’ of the AO in the course of assessment. Hence, the ground for initiating action against the assessee by the AO was initially ‘concealment’.

However, this ground was substituted by the AO to furnish inaccurate particulars of income’ while imposing the penalty quantified by the AO.

The tribunal after reviewing the facts and submissions of the both parties the two-member bench of Kul Bharat (Judicial Member) and Pradip Kumar Kedia (Accountant Member) held that where the concerned Income Tax authorities were not sure about the nature of default, the penalty action under Section 271(1)(c) of the Income Tax Act is not sustainable in law. 

Snehil, counsel appeared on behalf of the assessee and Anuj Garg, appeared on behalf of revenue.

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