ZF Sterling Gear (India) Limited Vs DCIT (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal (ITAT), Delhi, arose from a penalty order dated 29.11.2023 passed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2014–15. The assessee challenged the order of the Commissioner of Income Tax (Appeals), which had upheld the penalty. Although multiple grounds were raised, the assessee primarily argued that the penalty was invalid as the AO failed to establish whether the case involved “concealment of income” or “furnishing inaccurate particulars of income,” which are the two distinct limbs under Section 271(1)(c).
The assessee contended that both in the assessment order dated 28.12.2016 and the show cause notice issued on the same date, the AO invoked both limbs of Section 271(1)(c) without striking off the inapplicable portion. This lack of clarity, it was argued, rendered the penalty proceedings legally defective. The assessee relied on several judicial precedents, including decisions of the Supreme Court and various High Courts, which held that failure to specify the exact charge in penalty proceedings invalidates such proceedings.
Upon examining the record, the ITAT observed that the AO had indeed failed to record a clear and specific satisfaction regarding the applicable limb of Section 271(1)(c). Both the assessment order and the show cause notice referred simultaneously to concealment of income and furnishing inaccurate particulars without specifying which charge was being pursued. Furthermore, the Tribunal noted inconsistency in the penalty order itself. While the AO stated that penalty was being imposed for furnishing inaccurate particulars of income, the actual imposition was made for concealment of income. This contradiction demonstrated uncertainty on the part of the AO regarding the basis of the penalty.
