Acit, Cuttack vs Bishandayal Jewellers - (Income Tax Appellate Tribunal) (15 Oct 2020)

Penalty cannot be imposed in absence of clarity on whether there is concealment of income

MANU/IF/0079/2020

Direct Taxation

In present appeals, the grievance of the revenue is that the learned CIT(A) was not justified in deleting the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 (IT Act) by following the decision of decision of Hon'ble Supreme Court in the case of CIT vs. SSA's Emerald Meadows.

At the time of hearing, learned Departmental Representative by referring to the grounds of appeal submitted that the decision of Hon'ble Supreme Court in the case of CIT vs. SSA's Emeralds Meadow is not binding on the department in view of the decision of Hon'ble Supreme Court in the case of Shanmugavael Nadar, wherein, it is held that a rejection of SLP through a non-speaking order is not a binding precedent. He, therefore prayed that the orders of the learned CIT(A) be reversed by restoring the order of the AO.

The only issue to be decided in the grounds of appeal is regarding deletion of penalty levied under Section 271(1)(c) on the ground of inappropriate words in the said notices have not been struck off. A perusal of the notices issued under Section 274 read with Section 271 dated 29th December, 2017 show that the inappropriate words in the said notice have not been struck off. Even the last line of the said notice only speaks of Section 271 of the IT Act and does not even mention of Section 271(1)(c) of the IT Act. It is pertinent to note here that the penalty order is based on furnishing of inaccurate particulars but the notice is not specifying exactly on which limb the penalty under Section 271(1)(c) of IT Act has been initiated.

From the notices dated 29th December, 2017, for both the assessment years produced during the hearing, it can be seen that the Assessing Officer was not sure under which limb of provisions of Section 271 of the IT Act, the assessee is liable for penalty. In the instant case also, the inappropriate words in the penalty notices have not been struck off and the notices do not specify as to under which limb of the provisions, the penalty under Section 271(1)(c) of IT Act has been initiated.

On perusal of the impugned order, present Tribunal observe that, the learned CIT(A) deleted the penalty after considering the decision of Hon'ble Karnataka High Court in the case of CIT vs Manjunatha Cotton & Ginning Factory, and also the decision of Hon'ble Supreme Court in the case of CIT vs SSA's Emerald Meadows. Hon'ble High Court of Karnataka in the case of Manjunatha Cotton & Ginning Factory has held that, the Assessing Officer has to clearly specify whether there is concealment of income or whether there is filing of inaccurate particulars of income and in the absence of such clarity, the levy of penalty will be bad in law.

The learned CIT(A) has followed the judicial discipline by following the proposition in the case of Manjunatha Cotton, which decision has been upheld by Hon'ble Supreme Court in the case of CIT vs. SSA's Emerald Meadows. Therefore, the learned CIT(A) was justified in deleting the penalty levied under Section 271(1)(c) of the IT Act. Hence, there is no infirmity in the orders of the CIT(A). Appeals of the revenue are dismissed.

Tags : DELETION PENALTY VALIDITY