Imposing Section 271(1)(c) of the Income Tax Act

Last updated: 13 July 2021

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The Income Tax Appellate Tribunal (ITAT) Hyderabad has overturned a penalty of over £200,000 imposed on M/s. Radical Bio Organics Limited. The penalty, levied under Section 271(1)(c) of the Income Tax Act, was deemed unsustainable in law. This decision was based on the Assessing Officer's failure to specify whether the assessee had concealed income or provided inaccurate particulars, a requirement highlighted by High Court precedents.

Court :
ITAT Hyderabad

Brief :
This assessee’s appeal for AY.2013-14 arises from the CIT(A)-3, Hyderabad’s order dated 24.08.2017 passed in case No.0533/ITO 3(2)/Hyd/CIT(A)-3/16-17, involving proceedings u/s. 271(1)(c) of the Income Tax Act, 1961 [in short, ‘the Act’].

Citation :
ITA No.1633/Hyd/2018

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD ‘ B ‘ BENCH, HYDERABAD.

BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND
SHRI L. P. SAHU, ACCOUNTANT MEMBER
(Through Virtual Hearing)

ITA No.1633/Hyd/2018
(Assessment Year : 2013-14)

M/s. Radical Bio Organics Limited,
R.R. District-501144
PAN AAECR 6026Q …..Appellant.

Vs.

Income Tax Officer,
Ward 3(2), Hyderabad. …..Respondent.

Appellant By : None.
Respondent By : Shri M. Dayasagar. (D.R.)

Date of Hearing : 24.05.2021.
Date of Pronouncement :01.07.2021.

O R D E R

Per Shri S.S. Godara, J.M. :

This assessee’s appeal for AY.2013-14 arises from the CIT(A)-3, Hyderabad’s order dated 24.08.2017 passed in case No.0533/ITO 3(2)/Hyd/CIT(A)-3/16-17, involving proceedings u/s. 271(1)(c) of the Income Tax Act, 1961 [in short, ‘the Act’].

2. We now advert to the assessee’s sole substantive grievance challenging correctness of both the lower authorities’ action imposing Section 271(1)(c) penalty of Rs.2,22,08,925/- in Assessing Officer’s penalty order dt.23.02.2016 as upheld in the CIT(A)’s lower appellate order.

3. Learned departmental representative fails to dispute at the outset that the Assessing Officer’s penalty show cause notice dt.23.02.2016 nowhere specified as to whether the assessee had concealed particulars of his taxable income or furnished inaccurate particulars of such an income as contemplated u/s. 271(1)(c) of the Act. Hon'ble jurisdictional high court’s decision Pr.CIT Vs. Baisetty Revathi [398 ITR 88] (Telangana & AP) holds that - such a failure renders penal action as not sustainable in law. The very legal preposition also stands reiterated in Mohd.Farhan A.Shaikh Vs. DCIT (2021) [125 taxmann.com 253] (Bom) (FB) as well. We therefore delete the impugned penalty on this precise legal issue alone.

4. This assessee’s appeal is allowed in above terms.

Order pronounced in the open court on 1st July, 2021.

Sd/- Sd/-
(L.P. SAHU) (S.S. GODARA)
Accountant Member Judicial Member

Hyderabad, Dt.01.07.2021.
* Reddy gp

Copy to :
1. M/s. Radical Bio Organics Limited,
Sy.No.36 3484 Jakkepally Yalal Mandal,
Tandur Vikarabad.
2. ITO, Ward 3(2), Hyderabad.
3. Pr. C I T-3, Hyderabad.
4. CIT(Appeals)-3, Hyderabad.
5. DR, ITAT, Hyderabad.
6. Guard File.

By Order
Sr. Pvt. Secretary, ITAT, Hyderabad.

FAQ :

The case concerned a penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, which the assessee appealed.

The penalty imposed was £2,22,08,925.

The penalty was quashed because the Assessing Officer's notice did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars, rendering the action unsustainable in law.

The ruling cited decisions from the jurisdictional High Court in Pr.CIT Vs. Baisetty Revathi and the Bombay High Court in Mohd.Farhan A.Shaikh Vs. DCIT.

The assessee's appeal was allowed, and the impugned penalty was deleted.