Rikhabchand Vachraj Mehta Vs ITO (ITAT Mumbai)
Penalty u/s 271(1)(c) quashed for want of satisfaction and vague charge – Section 14A disallowance
The Mumbai ITAT allowed the assessee’s appeal and deleted penalty of ₹22,563 levied under section 271(1)(c) for AY 2012-13 in relation to a disallowance made under section 14A read with Rule 8D.
The Tribunal noted that no satisfaction for initiation of penalty proceedings was recorded in the assessment order passed under section 143(3). On this ground alone, the penalty proceedings were held to be invalid.
Further, the Tribunal observed that the Assessing Officer had mechanically levied penalty merely because the disallowance under section 14A was sustained in quantum proceedings. There was no finding that the assessee earned exempt income, nor any specific finding as to how inaccurate particulars were furnished. The AO also used the expressions “concealment of income” and “furnishing inaccurate particulars” interchangeably, without specifying the exact charge.
It was held that confirmation of addition in quantum proceedings by itself cannot justify levy of penalty, especially where there is lack of application of mind and absence of a clear, specific charge. On these twin defects—absence of satisfaction and vague charge—the penalty was directed to be deleted. The assessee’s appeal was accordingly allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
