2019 (3) TMI 1397 - AT - Income Tax

Penalty levied u/s 271(1)(c) - collection collected and credited to building fund, disallowance of excess depreciation and commission income accounted short - HELD THAT - As relying on SAMSON PERINCHERY 2017 (1) TMI 1292 - BOMBAY HIGH COURT satisfaction of the AO with regard to only one of the two breaches mentioned under Section 271(1)(c) for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the assessee has no notice. - We delete the penalty u/s 271(1)(c) confirmed by the Ld. CIT(A). - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty u/s 271(1)(c) of the Income Tax Act 1961 for assessment year 2010-11.

Analysis:
The appeal filed by the assessee contested the penalty imposed under section 271(1)(c) of the IT Act for various additions and disallowances in the assessment. The grounds of appeal included challenges related to collection credited to building fund, excess depreciation, and commission income shortfall. The counsel for the assessee argued discrepancies in the penalty notice and the grounds for penalty initiation, citing legal precedents to support the argument. The AO initiated the penalty for inaccurate particulars but imposed it for concealment of income in the penalty order.

The ITAT Mumbai analyzed the case and noted the inconsistency between the grounds for penalty initiation and imposition. Referring to a Bombay High Court decision, the tribunal emphasized that penalty should be imposed only on the grounds for which proceedings were initiated, not on new grounds. Consequently, the ITAT decided to delete the penalty u/s 271(1)(c) confirmed by the CIT(A) based on this legal principle.

Therefore, the appeal was allowed, and the penalty under section 271(1)(c) was deleted in line with the legal precedent cited from the Bombay High Court. The judgment highlighted the importance of maintaining consistency between the grounds for penalty initiation and imposition, ensuring that the assessee is duly informed and has the opportunity to respond to the specific grounds for which penalty proceedings are initiated.