'Concealment Of Income' & 'Furnishing Inaccurate Income Particulars' Distinct Grounds For Penalty U/S 271(1)(c) Of IT Act, Can't Be Clubbed: Delhi HC

A division bench of Justices Yashwant Varma and Ravinder Dudeja reasoned that the proceedings for initiating penalty are penal in nature, which may result in imposition of penalty ranging from 100 to 300% of the taxability and therefore, the chargemust be “unequivocal and unambiguous”.

In the case at hand, Respondents-Assessees had declared a loss after writing off certain advances.

The Assessing Officer however disallowed the alleged expenditure noted that the assessee company had failed to file any agreement or supporting evidence in respect of the advance. It proceeded to pass a penalty order following which, the Assessee preferred an appeal successfully before the ITAT.

ITAT held that the notice for levying penalty was vague as there was no specific charge for initiation of penalty proceedings which the assessee could explain.

The Revenue thus approached the High Court and claimed that the ITAT misdirected itself by taking a hyper technical view that there is no specific charge in the notice. It submitted that there is an overlap between the phrases “concealment of particulars of his income” and “furnished inaccurate particulars of such income” and effectively, there is no prejudice to the assessee in terms of them not being put to notice.

Disagreeing, the High Court held that the two phrases i.e. “conceal” and “furnishing of inaccurate particulars” are separate and distinct.

“Concealment of income and furnishing of inaccurate particulars of income in Section 271(1) (c) of the Act carry different meanings and connotation. On principle where the penalty proceedings are said to be initiated by the Revenue under Section 271(1) (c) of the Act, the specific ground which forms the foundation thereof needs to be spelt out in clear terms. Otherwise, the assessee would not have proper opportunity to put forth his defence,” it said.

The High Court also observed that penalty for concealment of income is not mandatory whenever an addition of disallowance is made.

“Finding in the assessment proceedings is not conclusive and final for the purpose of imposition of the penalty under Section 271(1) (c) of the Act, inasmuch as…Penalty is imposed not because an addition is made but because there is concealment or furnishing of inaccurate particulars by the assessee,” it said.

In view of the above, Revenue's appeal was dismissed.

Appearance: Standing counsel Zoheb Hossain with Junior standing counsel Sanjeev Menon for Revenue

Case title: Pr. Commissioner Of Income Tax – 04 v. M/S Gragerious Projects Pvt. Ltd.

Case no.: ITA 90/2020

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