Penalty proceedings initiated on one limb & penalty imposed on two limbs invalid

Penalty proceedings initiated on one limb and penalty imposed on two limbs invalid  

ABCAUS Case Law Citation:
ABCAUS 3336 (2020) (07) ITAT

Important case law relied upon by the parties:
Shri Narendra P. Musale vs. ITO
Commissioner of Income Tax Vs. Samson Perinchery 392 ITR 4

In the instant case, appeal was filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals) confirming the penalty u/s 271(1)(c) of the Income Tax Act, 1961 (the Act).

Before, the Tribunal, the assessee raised additional grounds of appeal raising a legal issue that the Assessing Officer (AO) initiating the penalty proceedings on one limb and imposing penalty under both the limbs was not maintainable.

The assessee was a company and engaged in the business of construction. During the scrutiny proceedings, the AO inter alia made addition on account of non-genuine purchases based on the information received from Sales Tax Department. 

In the first appellate proceedings, the CIT(A) restricted the addition to 30% on the basis of estimation. The assessee accepted the addition to buy peace and to avoid further litigation.

As the matter stood thus that the subsequently, the AO initiated penalty proceedings u/s 271(1)(c) on the charge that the assessee concealed particulars of income and imposed a penalty being minimum @ 100% on both charges i.e. concealment of income and furnishing inaccurate particulars of income. The CIT(A) confirmed the same.

The Tribunal noted that the Assessing Officer had initiated penalty proceedings u/s 271(1)(c) of the Act on a charge that the assessee concealed the particulars of income and imposed penalty on both the charges i.e. concealment of income and furnishing inaccurate particulars of income which was not maintainable.

The Tribunal observed that in another case, following  the  decision  of Hon‟ble High Court, it had held that the AO should be clear as to which limb of two charges under which the penalty is to be imposed falling which the penalty imposed on both the limbs contrary to the findings in assessment order is not maintainable.  

The Tribunal noted that there was no dispute that the AO initiated penalty proceedings on the charge of concealment of income and imposed penalty on both the charges. It was clear that the AO initiated penalty proceedings on one limb and imposed penalty on two limbs.

The Tribunal opined that penalty as confirmed by the CIT(A) was not maintainable. Therefore, it deleted the penalty imposed.

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