Can basis of initiation of penalty and basis of imposition of penalty may be different?

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Can basis of initiation of penalty and basis of imposition of penalty may be different?

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Short note of today's case law for quick reference:

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[2024] 114 ITR (S.N. 86) Chandigarh Tribunal B- Bench

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Yamuna Power and Infrastructure Ltd.

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Deputy Commissioner of Income Tax

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Vikram Singh Yadav (AM) and Paresh M. Joshi (JM)

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19.07.2024

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1. Penalty u/s 271AA is levied under the following situations:

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?? (i) Where the person entering into an international transaction or specified domestic? transaction fails to keep or maintain information and documents as required u/s 92D(1) or section 92D(2).

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? (ii) Where such person fails to report the transaction.

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?(iii) Where such person maintains, or furnishes, incorrect information or document thereof.

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2. It needs to be seen on what grounds the proceedings have been initiated and on what grounds, the proceedings have been completed and penalty levied.

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3. Once the proceedings are initiated on one or more grounds, the penalty should also be imposed on the same grounds.

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4. For A.Y. 2014-15 on reference to T.P.O., the T.P.O. drew no adverse inference thereon, except for stating that the assessee had not reported transactions relating to purchase, rent paid and remuneration to directors in form 3CEB and that the A.O. shall examine the initiation of proceedings u/s 271AA thereof.

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5. Subsequently the A.O. levied penalty at 2% of the total specified domestic transactions for the assessee’s failure to maintain and furnish ledger account as required u/s 92E and for not making effort to ensure all accounts were maintained.

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6. The CIT(A) confirmed the penalty.

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7. ITAT held that penalty could not be sustained because

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? (a) the penalty had been initiated for non-reporting of the specified domestic transactions in form 3CEB entered into by the assessee whereas penalty has been imposed for failure to maintain accounts as required u/s 92E.

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? (b) the requirement to maintain information and documents were specified in section 92D and not section 92E.

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? (c) Even if wrong mention of section was ignored, the basis for initiation and final levy of penalty were distinct.

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8. The assessee explained that it had acted on the professional advice of its auditors to report only those transactions that exceeded the threshold and consequently, the transactions undertaken with four were duly reported in form 3CEB while the other transactions were not reported since they did not exceed the prescribed threshold.

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9. Therefore, as the assessee had a reasonable cause for non-reporting of transactions in terms of section 273B, no adverse view was called for.

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10. Neither T.P.O. nor assessing office had commented adversely on the assessee’s explanation.