2007 (4) TMI 208 - HC - Income Tax

Penalty levied u/s 271(1)(c) - concealment of particulars of income or furnishing inaccurate particulars - Penalty can be levied on the minor? - whether the representative is answerable to the penalty - HELD THAT - All that the section 271(1)(c), requires is to consider the explanation and also proving by the Department with regard to concealment in the case on hand. Materials are staring against the assessee. Therefore, the findings of the Tribunal that the Department has not discharged its duty of concealment in the light of the detailed order of the Assessing Officer and in the light of the staring material available on record. This is not a case of no concealment or of no inaccurate particulars of income in terms of section 271(1)(c) of the Act. Thus, we are of the view that the first question has to be answered in favour of the Revenue. We see that admittedly, the assessee is a minor. The natural guardian has made a statement that the whole thing was done under his advice. Section 271(1)(c) would provide for penalty under the Act in the event of the Assessing Officer or the Commissioner being satisfied that any person has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 (or fails to comply with a direction issued under sub-section (2A) of section 142). Person has been defined u/s 2(31). A careful reading of the definition of person would show that a minor cannot said to be a person for the purpose of section 271(1)(c) of the Act. we are of the view that a minor cannot be saddled with any penalty for any omission and commission committed by others acting on behalf of the minor. In CIT v. R. Srinivasan 1997 (1) TMI 44 - MADRAS HIGH COURT has ruled that any sum payable by the guardian on behalf of the minor is recoverable u/s 162 of the Act by the guardian including penalty for the default committed by him. The logic is simple. Any omission or commission committed by a representative or a guardian cannot be fastened on the minor in terms of the Act. Therefore, we deem it proper to hold that no penalty can be levied on the minor. Whether the representative is answerable to the penalty - Section 159 deals with legal representatives. Section 160 deals with representative assessee and section 161 deals with liability of a representative assessee. Section 162 provides for recovery of tax by the representative of the assessee. The Madras High Court has however chosen to consider the penalty which could be imposed on the guardian. The Madras High Court after noticing sections 162 and 271 has ruled that even assuming that the guardian is not entitled to recover the penalty paid u/s 271(1)(a) of the Act from the minor's estate, that would not mean that no penalty is imposable on the guardian for the delay in filing the returns for the minor. Even sections 160 and 161 would deal with representative. Since the Tribunal has not considered this aspect of the matter, we deem it proper to direct the Tribunal to reconsider the liability of a representative with regard to penalty in the given circumstances in the light of Chapter XV of the Income-tax Act. The second question is not answered and the matter is remitted back for redecision.

Summary

Issues:
1. Concealment of income and penalty under section 271(1)(c) - Leviable or not
2. Penalty under section 271(1)(c) on a representative assessee - Leviable or not

Issue 1 - Concealment of income and penalty under section 271(1)(c) - Leviable or not:
The case involved the receipt of gifts by the assessee from two individuals. The Commissioner upheld the addition of the gift amount as income under section 68 of the Income-tax Act. The Assessing Officer initiated penalty proceedings for concealment of income, as there was no confirmation of the donors. The legal representative failed to prove that the income was not concealed. The Tribunal rejected the appeal by the Revenue, leading to the current challenge. The court examined the material on record, including the Assessing Officer's findings, and concluded that there was concealment of income. The court held that the explanation provided by the assessee was inaccurate and did not absolve them of concealment. The Tribunal's decision was deemed incorrect as the Department had provided sufficient evidence of concealment, justifying the penalty under section 271(1)(c).

Issue 2 - Penalty under section 271(1)(c) on a representative assessee - Leviable or not:
Regarding the penalty on a representative assessee, the court considered the definition of "person" under section 2(31) and concluded that a minor cannot be penalized under section 271(1)(c) due to protection based on age factors and other enactments. The court cited precedents from Kerala and Madras High Courts to support the view that penalties for omissions or commissions by guardians cannot be imposed on minors. The court clarified that penalties under section 271(1)(c) apply to the person filing returns, not the beneficiary. However, the Tribunal's interpretation was deemed flawed, as it could allow representatives to evade penalties. The court directed the Tribunal to reconsider the liability of a representative for penalties in accordance with Chapter XV of the Income-tax Act, highlighting the need for a reasonable interpretation to achieve the Act's objectives.

In conclusion, the court upheld the concealment of income and the penalty under section 271(1)(c) while remitting the issue of penalty on a representative assessee back to the Tribunal for further consideration.