Lakshmi Rani vs. ITO: Penalty Reversed Due to Procedural Errors in ITA 6563/DEL/2019

Lakshmi Rani vs. ITO: Penalty Reversed Due to Procedural Errors in ITA 6563/DEL/2019

Case Number: ITA 6563/DEL/2019
Assessment Year: 2015-16
Filed Date: 2019-08-07
Order Date: 2021-09-27
Pronounced On: 2021-09-27

Background:

This appeal was filed by Lakshmi Rani, an individual engaged in the business of financial services and facilitating loans for clients from financial institutions, against the penalty order passed by the Income Tax Officer (ITO), Ward-43(5), New Delhi. The penalty of Rs. 3,17,366/- was levied under Section 271(1)(c) of the Income Tax Act, 1961, based on an addition of Rs. 10,27,074/- made during the assessment for the year 2015-16.

Why the Case Was Filed:

The case was filed by Lakshmi Rani challenging the penalty levied under Section 271(1)(c) of the Income Tax Act. The penalty was imposed on the grounds that the appellant allegedly furnished inaccurate particulars of income, particularly concerning payments made to agents. The appellant contended that the penalty was wrongly imposed because the payments to the agents were made through banking channels, but the appellant could not provide the current addresses of these agents due to the lapse of three years since the transactions.

Tribunal’s Findings:

1. Procedural Errors in Penalty Imposition:

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, noted that the Assessing Officer (AO) recorded satisfaction of income concealment in the assessment order but levied the penalty for furnishing inaccurate particulars of income in the penalty order. This discrepancy between the satisfaction recorded and the penalty levied was a key procedural flaw.

2. Lack of Proper Show Cause Notice:

The ITAT highlighted that the AO failed to issue a proper show cause notice to the appellant that clearly delineated whether the penalty was being considered for concealment of income or for furnishing inaccurate particulars. The Bombay High Court in the case of CIT vs. Samson Perinchery (2017) 392 ITR 4 (Bom) had held that such inconsistencies invalidate the levy of penalty.

3. Inadequate Recording of Satisfaction:

The Tribunal emphasized that the basic condition for levying a penalty under Section 271(1)(c) is the proper recording of satisfaction by the AO during the assessment process. In this case, the Tribunal found that this condition was not met adequately, which further rendered the penalty order unsustainable.

Conclusion:

The ITAT, Delhi Bench, ruled in favor of Lakshmi Rani, allowing the appeal and setting aside the penalty order passed by the AO. The Tribunal concluded that the procedural errors and the lack of proper satisfaction recording made the penalty order untenable.

Order Pronounced in Open Court: 27th September 2021

Bench: Sh. Anil Chaturvedi, Accountant Member

Lakshmi Rani vs. ITO: Penalty Reversed Due to Procedural Errors in ITA 6563/DEL/2019