The Income Tax Appellate Tribunal (ITAT) New Delhi, has ruled that penalty cannot be levied under section 271 (1)(c) without clarifying under which limb of the provision such penalty is called for.
The assessee, M/s Sucon India Ltd. is engaged in the business of trading in shares & securities and works contract assignments. It filed its return of income in 2009 declaring loss of ₹ 25,94,45,470/-. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Income Tax Act. Rejecting the various explanation given by the assessee and observing that the assessee has furnished inaccurate particulars of income, the AO levied penalty at 100% of the tax sought to be evaded.
The counsel for the respondents , Adv. Dr. Rakesh Gupta and Adv. Shri Somil Aggarwal contended that the Commissioner of Income Tax (Appeals)(CIT(A)) had cancelled this penalty levied by observing that, “ “..the assessee had made full disclosure and there was neither any concealment of income nor furnishing of inaccurate particulars. In fact, the Tribunal has found that the justification furnished by the respondent assessee was bonafide. Consequently, keeping in view the conclusion of facts arrived at by the Tribunal, the explanation offered by the respondent assessee is bonafide and the respondent assessee’s case would fall within ambit of explanation 1 to section 271 of Act “
This order was challenged by the Revenue before the Tribunal wherein Judicial Member Kuldip Singh and Accountant Member R K Panda dismissed it observing, “ . .it is not understood as to under which limb of the provisions of section 271(1)(c), the Assessing Officer has initiated penalty proceedings i.e. whether for concealment of income or for furnishing of inaccurate particulars of such income. The Hon’ble Delhi High Court in the case of PCIT vs Sahara India Life Insurance Company Ltd. (supra) has dismissed the appeal filed by the Revenue on identical circumstances, the relevant observations of which have already been reproduced in the preceding paragraphs while recording the arguments of the learned counsel for the assessee. We, therefore, hold that the notice issued by the Assessing Officer is bad in law since it did not specify under which limb of section 271(1)(c) of the Act, the penalty proceedings have been initiated i.e. whether for concealment of income or for furnishing of inaccurate particular of income. In this view of the matter, we uphold the order of the learned CIT(A) cancelling the penalty levied by the Assessing Officer. The grounds raised by the Revenue are accordingly dismissed.”
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