2013 (10) TMI 1543 - AT - Income Tax

Summary

Issues involved: Challenge against penalty imposed u/s 271(1)(C) and its reduction to &8377; 57,890/- u/s 271 AAA of the Income Tax Act.

Summary:
The appellant, a partnership firm in the business of Garments, challenged the penalty imposed u/s 271(1)(C) for assessment year 2008-09. The appellant contended that the penalty order was passed without jurisdiction as the AO issued notice u/s 271(1)(C) where there was no provision to do so. The appellant argued that the AO did not find any adverse findings during the search operation or assessment proceedings, and the penalty initiation was invalid from the beginning. The appellant also raised concerns about the CIT (Appeals) dismissing certain grounds without considering them, which went against the principles of natural justice.

During the proceedings, the AR of the assessee sought quashment of the penalty, while the DR supported the order of the CIT (A) and argued that the penalty should be confirmed. The Tribunal noted that penalty provisions of section 271AAA were applicable during the search period, but the AO initiated penalty proceedings u/s 271(1)(C), which was not permissible under the law. The Tribunal highlighted the distinction between the provisions of section 271AAA and section 271(1)(C), emphasizing that only the AO could impose penalty u/s 271AAA. Therefore, the conversion of penalty by the CIT (A) into section 271AAA was not justified.

Consequently, the Tribunal allowed the appeal of the assessee, vacating the penalty imposed u/s 271(1)(C) and its conversion to section 271AAA. The penalty was reduced to &8377; 57,890/- in favor of the assessee.

Judgment delivered by: SHRI U.B.S. BEDI, JUDICIAL MEMBER And SHRI T.S. KAPOOR, ACCOUNTANT MEMBER