Penalty u/s 271(1)(c) confirmed despite non specifying charge in the notice as assessee not raised it before CIT(A) and changed stand before ITAT
ABCAUS Case Law Citation:
ABCAUS 3050 (2019) (07) ITAT
Important Case Laws Cited/relied upon by the parties:
CIT v. Zoom Communication (P) Ltd. [327 ITR 510]
Sundaram Finance Ltd. v. ACIT (2018) 93 taxmann.com 250
The instant appeal filed by the assessee was directed against the order of the Commissioner of Income Tax (Appeals) in confirming levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 [“Act”].
During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee sold property and claimed deduction under section 54 of the Act.
The Assessing Officer found that the amount claimed as deduction under section 54 of the Act was towards repayment of loan amount availed for the purchase of property which was sold. The Assessing Officer also disallowed indexed cost of improvement for want of proof.
On appeal, the CIT(A) confirmed the disallowance, which came to be sustained by the Tribunal also.
Accordingly, penalty proceedings were initiated by issuing notice under section 271(1)(c) of the Act and after considering the submissions of the assessee, the AO levied penalty under section 271(1)(c) of the Act.
On appeal, the CIT(A) confirmed the penalty.
Before the Tribunal, the assessee submitted that the penalty levied was not legally sustainable as the notice proposing to levy of penalty did not clearly mentioned as to whether it was a case of concealment of particulars of income or furnishing inaccurate particulars of income for the purpose of assumption of jurisdiction under section 271(1)(c) of the Act.
It was further submission that the assessee had not concealed any income or furnished any particulars of income nor filed any inaccurate particulars of income and thus, prayed for deleting the penalty levied under section 271(1)(c) of the Act.
The Tribunal observed that the assessee had raised the ground that the penalty levied was not legally sustainable as in the notice u/s 274 proposing to levy penalty the non applicable charge had not been struck off,. In other words, the notice did not clearly mention as to whether it is a case of concealment of particulars of income or furnishing inaccurate particulars of income for the purpose of assumption of jurisdiction under section 271(1)(c) of the Act.
The Tribunal noted that admittedly, the above ground was not raised either before the Assessing Officer while passing penalty order under section 271(1)(c) of the Act or before the CIT(A).
It was also noted that in the penalty order, the Assessing Officer had observed that but for the scrutiny assessment, the assessee would have unjustly got enriched by the tax payable on the long term capital gains earned by her and thus, the assessee had attempted to evade the lawful amount due to the Government. Since the assessee made an incorrect claim in law which is nothing but furnishing of inaccurate particulars of income, leading to concealment of income and thereby, levied penalty under section 271(1)(c) of the Act.
The Tribunal observed that the substantial question of law raised in the instant appeal was also subject matter in appeal before the Hon’ble Jurisdictional High Court wherein, when the assessee had, very well understood that it had no case in its favour, the assessee had challenged the defect in the notice. However, the Hon’ble High Court rejected the contention raised by the assessee. The High Court noted that the assessee had at no earlier point of time raised the plea that on account of a defect in the notice, they were put to prejudice.
The High Court held that all violations not result in nullifying the orders passed by statutory authorities. If the case of the assessee was that they had been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, only then it would be a different matter.
The Tribunal opined that in the instant case also, the assessee had clearly understood what was the purport and import of notice issued under section 274 r.w.s. 271 of the Act. Therefore, the principles of natural justice could not be read in abstract and the assessee, being regularly assessed to income tax should be precluded from raising such a ground.
The Tribunal noted that before the CIT(A), the assessee had mainly contended on the issue of service of notice and its validity and also argued that making an incorrect claim in law could not tantamount to furnishing inaccurate particulars. According to the Tribunal thus, the assessee admited filing of inaccurate particulars and sought for remedy and when the attempts failed, the assessee took a different ground before the Tribunal that there was defect in the notice issued to the assessee.
In view of the above facts and circumstances and following the decision of the High Court the Tribunal dismissed the ground raised.