Gawar Constructions Co. Pvt Ltd., based in Hisar, Haryana, faced multiple penalties imposed by the Income Tax Department under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2013-14 to 2016-17. These appeals were collectively heard by the Income Tax Appellate Tribunal, Delhi Bench ‘B’.
The penalties were levied for alleged discrepancies in income declarations across four consecutive assessment years, with varying penalty amounts for each year. The primary legal contention involved the appropriateness of the penalties based on the grounds of either concealment of income or furnishing inaccurate particulars of income.
During the hearings, the appellant argued that there was a lack of clear communication regarding the exact nature of the discrepancies and claimed that the penalties were not justified as the original notices did not specify the exact nature of the alleged defaults. This argument was pivotal in determining the outcome of the appeals.
The Tribunal, led by members Shri Chandra Mohan Garg and Shri Pradip Kumar Kedia, concluded that the penalties were improperly imposed due to a procedural flaw. The Tribunal found that the initial satisfaction noted by the Assessing Officer was for concealment, but the penalties were imposed on the grounds of furnishing inaccurate particulars—a significant deviation from the original basis for assessment.
The decision cited several precedents which supported the view that continuity must be maintained in the reasons from the assessment phase through to the penalty phase. Without such continuity, the penalty cannot stand. Consequently, all penalties imposed for the assessment years in question were cancelled, leading to a ruling in favor of the assessee.
This case highlights the importance of procedural accuracy and the need for clarity in tax assessments and penalty impositions. It underscores the necessity for tax authorities to maintain consistent legal grounds from the issuance of notice through to the final imposition of penalties.
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