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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
Principal Commissioner of Income Tax (central)-2 – Appellant
Versus
Gopal Kumar Goyal – Respondent
ITA 345 of 2023
Decided On : 06-07-2023
Penalty Proceedings - Income Tax - Section 271(1)(c) of the Income Tax Act, 1961 - AY 2004-05 - Summary: The court considered whether penalty proceedings were flawed due to the notice failing to indicate which limb of Section 271(1)(c) of the Income Tax Act, 1961 was attracted for initiation of proceedings. The court highlighted the need for the Assessing Officer to clearly indicate the satisfaction as to which limb of the provisions of Section 271(1)(c) of the Act was triggered vis-a'-vis the respondent/assessee. The court referred to relevant judgments and emphasized the requirement for the AO to clearly indicate the provision/limb under which penalty proceedings are triggered against the assessee. The court concluded that the penalty order could not be sustained due to the lack of clear satisfaction in the penalty notice, and consequently allowed the appeal of the respondent/assessee.
Fact of the Case:
The appeal concerned Assessment Year (AY) 2004-05 and was directed against the order passed by the Income Tax Appellate Tribunal. The issue before the court was whether the penalty proceedings were flawed due to the notice failing to indicate which limb of Section 271(1)(c) of the Income Tax Act, 1961 was attracted for initiation of proceedings.
Finding of the Court:
The court found that the penalty order could not be sustained due to the lack of clear satisfaction in the penalty notice, and consequently allowed the appeal of the respondent/assessee.
Issues: The main issue was whether the penalty proceedings were flawed due to the notice failing to indicate which limb of Section 271(1)(c) of the Income Tax Act, 1961 was attracted for initiation of proceedings.
Ratio Decidendi: The court emphasized the requirement for the Assessing Officer to clearly indicate the provision/limb under which penalty proceedings are triggered against the assessee, and concluded that the penalty order could not be sustained due to the lack of clear satisfaction in the penalty notice.
Final Decision: The appeal was accordingly closed.
JUDGMENT
[Physical Hearing/Hybrid Hearing (as per request)]
Rajiv Shakdher, J. (Oral)
CM APPL. 33608/2023
1. Allowed, subject to just exceptions.
CM APPL. 33609/2023
2. This is an application moved on behalf of the appellant/revenue seeking condonation of delay in re-filing the appeal.
2.1 According to the appellant/revenue, there is a delay of 220 days.
3. For the reasons given in the application, the delay is condoned.
4. Accordingly, the application is disposed of.
ITA 345/2023
5. This appeal concerns Assessment Year (AY) 2004-05.
6. The appeal is directed against the order dated 30.03.2022 passed by the Income Tax Appellate Tribunal [in short, "Tribunal"].
7. The short issue which arose for consideration before the Tribunal, and which also arises before this Court is: whether the penalty proceedings are flawed, since the notice issued in that behalf failed to indicate which limb of Section 271(1)(c) of the Income Tax Act, 1961 [in short, "the Act"] was attracted for initiation of proceedings? In other words, whether proceedings were triggered against the respondent/assessee for concealment of income or furnishing inaccurate particulars.
7.1 Given this position, it would be helpful to extract the relevant parts of Section 271(1)(c) of the Act.
"271. (1) If the Assessing Officer or the [Joint Commissioner (Appeals) or the] Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person-
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or"
7.2 A plain reading of Section 271(1)(c) of the Act would show, that it adverts to two circumstances, in which penalty proceedings can be initiated against an assessee. The first circumstance concerns concealment of particulars of income, while the second circumstance relates to furnishing of inaccurate particulars. If one were to read the expression "or" conjunctively, it could lead to a third situation, where inaccurate particulars could lead to concealment of income. In case such circumstance arises in a particular matter, the Assessing Officer's (AO) notice should reflect this position.
8. The record shows, that the Assessing Officer (AO), in the second round, that is, once the matter was remanded to him pursuant to the order dated 14.03.2012passed under Section 264 of the Act, had levied penalty at the rate of 300% via order dated 31.03.2017. This order was passed on the back of the assessment order dated 21.03.2013.
9. The respondent/assessee carried the matter in appeal to the Commissioner of Income Tax (Appeals) [in short, "CIT(A)"]. The CIT(A) via order dated 26.12.2018 scaled down the rate of penalty to 150%. It is in this backdrop, that both the appellant/revenue and the respondent/assessee preferred appeals with the Tribunal.
9.1 The Tribunal, via the impugned order allowed the appeal of the respondent/assessee, while rejecting the appeal of the appellant/revenue. The Tribunal ruled in favour of the respondent/assessee, having regard to the fact, that the AO had not arrived at a clear satisfaction as to which limb of Section 271(1)(c) was applicable, while passing the penalty order. In other words, according to the Tribunal, there was no clarity, whether the respondent/assessee had concealed the particulars of its income, or furnished inaccurate particulars.
10. We have queried Mr Sanjay Kumar, learned senior standing counsel, who appears on behalf of the appellant/revenue, whether the penalty notice had been filed with the appeal. Mr Kumar has submitted, that although the penalty notice has not been filed, the relevant part stands extracted in paragraph 9 of the impugned order. For the sake of convenience, the relevant part is extracted hereafter:
"...have concealed the particulars of your income...furnished inaccurate particulars of income..."
11. The Tribunal, after perusing the record and considering the submissions, observed as follows:
"13
The necessity for the Assessing Officer to clearly indicate the provision/limb under which penalty proceedings are triggered against the assessee.
The main legal point established in the judgment is the necessity for the assessing officer to clearly specify whether penalty is being levied for concealment of income or for furnishing inaccurate p....
Penalty proceedings under Section 271(1)(c) of the Income Tax Act require the Assessing Officer to clearly specify the provision/limb under which penalty proceedings are triggered against the assesse....
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