2009 (3) TMI 639 - AT - Income Tax

Penalty levied u/s 271(1) - inaccurate particulars of income or concealment of particulars of income - Whether penalty u/s 271(1)( c ) r/w Explanation 1 of section 271(1) is applicable - AO noticed that the assessee has wrongly claimed deduction u/s 80-I and u/s 80HH - CIT(A) deleted the deduction of addition made by AO u/s 80HHC and the additions on account of sections 80-I and 80HHC has not been agitated by the assessee against CIT(A). AO levied penalty. HELD THAT - The proceedings u/s 271(1)( c ) can be initiated only if the AO or the first Appellate Authority is satisfied in the course of any proceedings under the Act. If he is satisfied as per clause ( c ) that any person has concealed the particulars of his income or has furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty the sum mentioned in sub-clause ( iii ) of clause ( c ). The expressions has concealed the particulars of income and has furnished inaccurate particulars of income have not been defined either in section 271(1)( c ) or elsewhere in the Act. One thing is certain that these two circumstances are not identical in detail although they may lead to the same effect, namely, keeping off a certain portion of income. The former is direct and the latter may be indirect in its execution. The word conceal is derived from the latin concelare which implies con celare to hide. Webster in his New International Dictionary equates its meaning to hide or withdraw from observation, to cover or keep from sight; to prevent the discovery of; to withhold knowledge of . The offence of concealment is thus a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities. The duty is enjoined upon him to make a complete disclosure of his income as well as a correct disclosure. Therefore, if the disclosure made of the particulars of income is incorrect, then also he commits breach of his duty. Such defaults entail the penal consequences contemplated by section 271(1)( c )( iii ). We notice that the assessee has furnished all the particulars of income and AO has calculated the total income on the basis of those particulars filed by the assessee. The assessee has right to claim all deductions which according to him are permissible in law. It is the duty of AO to calculate correct income in accordance with law. If AO found otherwise on considering the material filed by the assessee, we do not find that in such cases where AO computed the different total income than the total income declared by the assessee is amount to furnishing of inaccurate particulars of income concealment of particulars of income. In the case under consideration, the assessee has claimed deduction u/s 80-IA for one more year i.e., for assessment year 1998-99 whereas he was eligible for deduction u/s 80-IA up to 1997-98. There is a simple calculation of total years of the allowability which appears to be a prima facie mistake in calculation of the period. Before completion of the assessment, the assessee has pointed out this mistake and filed a revised return though it is filed after stipulated period prescribed u/s 139(5). Still we find that it is not a case of furnishing inaccurate particulars of income or concealment of particulars of income. In the light of the above discussion, we find that it is not a fit case for penalty leviable u/s 271(1)( c ). The appeal of the assessee is allowed.

Issues Involved:
1. Legitimacy of the penalty levied under section 271(1)(c) of the Income-tax Act.
2. Validity of the revised return filed by the assessee.
3. Interpretation of "concealment of income" and "furnishing inaccurate particulars of income."

Detailed Analysis:

1. Legitimacy of the Penalty Levied under Section 271(1)(c):
The primary issue is whether the penalty of Rs. 7 lakhs levied under section 271(1)(c) of the Income-tax Act was justified. The Assessing Officer (AO) imposed the penalty on the grounds that the assessee had made false claims by furnishing inaccurate particulars of income. The CIT(A) upheld this penalty.

The Tribunal examined whether the penalty under section 271(1)(c) read with Explanation 1 was applicable. The penalty can be initiated if the AO or the first Appellate Authority is satisfied that any person has concealed particulars of income or furnished inaccurate particulars. The Tribunal emphasized that the terms "concealed the particulars of his income" and "furnished inaccurate particulars of income" are not defined in the Act but imply hiding or withholding information from the tax authorities.

The Tribunal noted that the penalty under this provision is a civil liability and does not require wilful concealment. The duty is on the assessee to make a correct and complete disclosure of income. Any failure in this duty, whether direct (concealment) or indirect (inaccuracy), attracts penal consequences.

2. Validity of the Revised Return Filed by the Assessee:
The assessee claimed deductions under sections 80-I, 80HH, and 80HHC, which were later found to be incorrect. The assessee revised its return, withdrawing the deduction under section 80-I for the assessment year 1998-99, arguing it was a prima facie mistake and not an attempt to conceal income.

The Tribunal considered whether the revised return, filed after the stipulated period under section 139(5), could be treated as valid. The Tribunal noted that the revised return was filed before the assessment was completed and that the AO calculated the total income based on the particulars provided by the assessee. The Tribunal found that the assessee's action did not amount to furnishing inaccurate particulars or concealment of income.

3. Interpretation of "Concealment of Income" and "Furnishing Inaccurate Particulars of Income":
The Tribunal delved into the meanings of "conceal" and "furnishing inaccurate particulars." Concealment implies a direct attempt to hide income, while furnishing inaccurate particulars involves indirect methods. Both circumstances lead to the same effect of keeping off a certain portion of income from the authorities.

The Tribunal explained that the duty to disclose income is enjoined upon the assessee, and any breach, whether by incorrect disclosure or non-disclosure, entails penal consequences under section 271(1)(c). The Tribunal also noted that the explanation offered by the assessee must be bona fide and substantiated by evidence. If the explanation is found false or unsubstantiated, the amount added or disallowed is deemed to represent concealed income.

In this case, the Tribunal found that the assessee had disclosed all particulars and that the AO's calculation of total income was based on these disclosures. The Tribunal concluded that the assessee's claim of deduction for one additional year was a prima facie mistake and not an attempt to conceal income or furnish inaccurate particulars. Therefore, the penalty under section 271(1)(c) was not justified.

Conclusion:
The Tribunal allowed the appeal, concluding that the penalty under section 271(1)(c) was not applicable as the assessee had not concealed particulars of income or furnished inaccurate particulars. The revised return, although filed late, did not constitute an attempt to mislead the tax authorities. The appeal of the assessee was allowed, and the penalty was set aside.

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