AO obliged to specify limb of section 271(1)(c) both at the time of initiation and levy of penalty.  

AO is under obligation to specify the limb of section 271(1)(c) at the time of initiation as well as at the time of levy of penalty.  

ABCAUS Case Law Citation:
ABCAUS 2689 (2018) (12) ITAT

Important Case Laws Cited/relied upon:
CIT Vs. Shri Samson Perinchery
CIT Vs. Manjunatha Cotton and Ginning Factory

This appeal is filed by the assessee against the order of CIT(A)

In the quantum assessment, the Assessing Officer had made various additions on account of disallowance of expenses and excess stock. Subsequently, the AO initiated the penalty proceedings by giving his satisfaction on the default of furnishing of inaccurate particular of income.

However, while levying the penalty u/s 271(1)(c) of the Act, the Assessing Officer invoked both the limits i.e. furnishing of inaccurate particulars of income as well as the concealment of particulars of income.

The CIT(A) confirmed the penalty. However, the issue relates to the satisfaction of the Assessing Officer qua the limbs of clause (c) of section 271(1) of the Act was not raised at that time by the assessee.

The Tribunal noted that in the penalty order, the satisfaction for initiating the penalty u/s 271(1)(c) of the Act was given mentioning the following:

 “The assessee has submitted inaccurate particulars of income, therefore, penalty proceedings U/S 271(1)(c) of the Act initiated are separately.”

Whereas in the Penalty order it was stated as under:

“………. Hence, I have therefore, reason to believe that the assessee has concealed the particulars of his income and furnished inaccurate particular of his income, therefore, levy a penalty u/s 271(1)(c) of the Income-tax Act, 1961 …….”  

The Tribunal opined that it was evident that the satisfaction given by the Assessing Officer suffered from the ambiguity in the mind of the Assessing Officer while recording the satisfaction at the time of initiating the penalty proceedings u/s 271(1)(c) of the Act.

Therefore, in view of the binding judgement on the issue, the Tribunal opined that that such penalty order was unsustainable in law legally as it is a settled legal proposition that the Assessing Officer is under obligation to specify the appropriate limb of clause (c) of section 271(1) of the Act at the time of initiation as well as at the time of levy of penalty.

The Tribunal set aside the order of CIT(A) and directed the Assessing Officer to delete the penalty on legal ground.

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