Penalty started for concealment levied for inaccurate particulars and concealment both is invalid-ITAT

Penalty initiated for concealment levied for inaccurate particulars and concealment both is invalid. AO must frame a precise charge u/s 271(1)(c)-ITAT

ABCAUS Case Law Citation:
ABCAUS 1073 (2016) (12) ITAT

Assessment Year: 2009-10
Date of Judgment: 29-11-2016

Important Case Laws cited:
Zoom Communications P Ltd 327 ITR 510 (Del),
Bhairav lal Verma V/s UOI  (230 ITR 855) Allahabad High Court
N D Shroff (Smaller HUF) V/s JCIT (82 TTJ (Mum) 626,
CIT V/s MAK Data (358 ITR 593) t

The Grievance:
The assessee was challenging the order passed by CIT(A) sustaining the penalty u/s 271(1)(c) of the Income Tax Act, 1961.

The Issue:
The issue before the Tribunal was whether the AO can initiate penalty on the charge of furnishing of inaccurate particulars of income and levy on both charges of concealment of income and furnishing of inaccurate particulars of income.

Brief Facts of the Case:
The return of income of the assessee was selected for scrutiny. Accordingly, statutory notices u/s 143(2) and 142(1) were issued and served upon the assessee. During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had an account with HDFC bank which was not disclosed in the books of account and cash in hand was showing credit balances at many instances. When confronted, the assessee offered surrender of income. Accordingly the AO made addition on account of peak of such credit balances and levied penalty for concealing the income and also furnishing in accurate particulars of income.

CIT(A) relying on the dictionary meaning of the word ‘conceal’, ‘inaccurate’  and ‘particulars of income’ held that both the concealment of facts or the furnishing of inaccurate particulars, lead to the same end result i.e withholding a certain portion of the income from returned income. He interpreted the section to mean that when any fact material to the determination of an item as income or material to the correct computation is not filed or that which is filed is not accurate, then the assessee would be liable to penalty under section 271(1)(c) of the Act.

After placing reliance on various judgments CIT(A) held that HDFC bank account was not disclosed in the return filed by the appellant. When confronted during assessment proceedings, the appellant simply surrendered the said income, offering no explanation for the same. Thus the appellant was been unable to substantiate that the cash deposits or to furnish a bonafide explanation for the anomaly detected by the AO or to have satisfactorily discharged the onus cast upon him. Consequently CIT(A) dismissed the appeal.

Observations made by the Tribunal:
The Tribunal noted that in the assessment order the penalty was initiated for furnishing inaccurate particulars of income whereas the penalty was imposed on account of both concealment of income and also for furnishing inaccurate particulars of income.

The ITAT opined that there must be a precise charge and imposition of penalty must be on that footing only.  Before levying penalty on the assessee, the AO must apprise the assessee of the precise charge levelled against him. He must be told vividly whether he is guilty of concealment of income or for furnishing inaccurate particulars of income.

The Tribunal clarified that the section 271(1)(c) r.w.s. 274 provides for a reasonable opportunity to be given to the assessee so that he can avail the opportunity to defend himself. Where the penalty proceedings are initiated on a particular footing or charge of concealment of income but final conclusion of levy of penalty is based upon some different footing altogether of concealment of income and also furnishing of inaccurate particulars of income, in that case it can not be presumed that the assessee has been given a reasonable opportunity of being heard before order imposing penalty is passed. In such case the imposition is not justified.

Held:
The order of CIT(A) was set aside and the appeal of the assessee was allowed.