3 Section 271(1)(c) –Where satisfaction of AO while initiating penalty proceedings u/s. 271(1)(c) is with regard to alleged concealment of income by assessee, whereas imposition of penalty is for ‘concealment/furnishing inaccurate particulars of income’, levy of penalty is not sustainable

 
[2018] 195 TTJ (Asr)(TM) 1

HPCL Mittal Energy Ltd. vs. ACIT

ITA No.: 
554 & 555/Asr/2014

A. Ys.: 
2008-09 & 2009-10  Dated: 20^th
June, 2018

Section 271(1)(c) –Where satisfaction of AO
while initiating penalty proceedings u/s. 271(1)(c) is with regard to alleged
concealment of income by assessee, whereas imposition of penalty is for
‘concealment/furnishing inaccurate particulars of income’, levy of penalty is
not sustainable

FACTS

During the year under consideration, the AO
made disallowance of business loss; non-declaration of interest income from
deposits with banks and non-declaration of interest income on Fixed Deposit
Receipts (FDRs) as security given to the trial court. The additions were
confirmed by the CIT(A) and the Tribunal.

The penalty notice u/s. 274 was issued by
stating that the assessee ‘concealed the particulars of income’ with respect to
the above three disallowance/additions. However, the penalty order was passed
holding that ‘the assessee concealed the particulars of income/furnished
inaccurate particulars of such income’.

On appeal to CIT(A), the penalty order was
affirmed.

On further
appeal to the Tribunal, the assessee contended the penalty was not sustainable,
on the ground that the Assessing Officer levelled charge of ‘concealment of
income’ and also issued penalty notices on the same charge, but found the
assessee guilty in the penalty orders on a different and vague default of ‘concealment
of the particulars of income/furnishing of inaccurate particulars of income’.

The Judicial
Member concurred with the submissions advanced on behalf of the assessee on
this preliminary legal ground and ordered deletion of penalty in his proposed common
order. On the other hand, Accountant Member passed order sustaining the penalty
on merits. On difference of opinion, matter was referred to the Third Member.

HELD

The Third Member held that the penalty
proceedings were separate from assessment proceedings, which got started with
the issue of notice u/s. 274 and concluded in the penalty order u/s. 271(1)(c).
Many a times, penalty initiated in the assessment order on one or more counts
by means of notice u/s. 274, was not eventually imposed by the AO on getting
satisfied with the explanation tendered by the assessee in the penalty
proceedings.

In any case,
confronting the assessee with the charge against him is sine qua non for
any valid penalty proceedings. It is only when the assessee was made aware of
such a charge against him that he could present his side.

It was evident that when the AO was
satisfied at the stage of initiation of penalty proceedings of a clear-cut
charge against the assessee in any of the three situations (say, concealment of
particulars of income), but imposed penalty by holding the assessee as guilty
of the other charge (say, furnishing of inaccurate particulars of income) or an
uncertain charge (concealment of particulars of income/furnishing of inaccurate
particulars of income), the penalty could not be sustained.

In the present
case, the Third Member held that the penalty was wrongly imposed and confirmed
and Judicial Member was justified in striking down all the penalty orders.