2014 (9) TMI 944 - HC - Income Tax

Penalty under section 271(1)(c) - Whether penalty proceedings under section 271(1)(c) are distinct from the quantum proceedings under section 143(3), thus requiring independent examination and appreciation of material facts containing material particulars on the merits thereof ? - whether additional evidences thereof for case adjudication is necessarily to be examined ? - Held that - In the revised return filed on December 2, 2008, the surrendered amount of ₹ 2.5 crores was shown therein when the assessee was cornered during the assessment proceedings. Even during the penalty proceedings before the Assessing Officer and the Commissioner of Income-tax (Appeals), there was nothing to show that the jewellery found at the premises of the assessee on October 27, 2006, was accounted money with the assessee. No satisfactory explanation had been furnished to demonstrate why the material sought to be produced now could not be produced earlier. Thus, in our opinion, in view of the above, the Tribunal was justified in rejecting the application for additional evidence filed by the assessee. Combined reading of section 132(4) and Explanation 5 to section 271(1)(c) would clearly show that immunity is available if the income is surrendered during search and the manner of earning such income is also disclosed and the assessee based on such dis closure paid tax on the same. In the case before us, after having made surrender, the assessee simply retracted from the statement and did not include the amount of surrender in the return of income. The income was included through revised return which has to be accepted by the Assessing officer because same was late. In any case the revised return was furnished only when the assessee was fully cornered during the assessment proceedings. In addition some more items of income were also found to be concealed particularly in respect of platinum and silver jewellery. Therefore, it is a clear case of concealment and penalty has been rightly levied and confirmed by the learned Commissioner of Income-tax (Appeals) - Decided against assessee.

Summary

Issues Involved:
1. Distinction between penalty proceedings under section 271(1)(c) and quantum proceedings under section 143(3).
2. Admission of additional evidence during penalty proceedings.

Issue-wise Detailed Analysis:

1. Distinction between Penalty Proceedings under Section 271(1)(c) and Quantum Proceedings under Section 143(3):

The appellant argued that penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961, are distinct from quantum proceedings under section 143(3) and require an independent examination of material facts. The court examined the facts of the case where the appellant, involved in the jewellery business, was subjected to a search under section 132 of the Act. During the search, unaccounted assets were discovered, and the appellant admitted to an unaccounted income of Rs. 2.5 crores. The appellant later filed a revised return, which was treated as non est since it was beyond the permitted period under section 139(5). The assessment was completed, and the tax was paid without any appeal against the assessment order. Penalty proceedings were initiated, and a penalty was levied under section 271(1)(c) for furnishing inaccurate particulars of income. The Tribunal upheld the penalty, noting that the appellant had retracted from the initial statement and failed to disclose accurate particulars in the original return. The court found no error in the findings of the Assessing Officer, Commissioner of Income-tax (Appeals), and the Tribunal, affirming that the penalty proceedings were justified.

2. Admission of Additional Evidence During Penalty Proceedings:

The appellant sought to introduce additional evidence, including affidavits from customers and statements from suppliers, to establish that the gold and diamond jewellery found during the search belonged to others. The Tribunal rejected this application, noting that the evidence was an afterthought and lacked credibility. The court observed that the application for additional evidence was filed almost six years after the search and during the second appeal stage of the penalty proceedings. The appellant had accepted the tax liability and paid the taxes without challenging the assessment order. The Tribunal concluded that the additional evidence was an attempt to retract from the earlier statement made under oath during the search. The court upheld the Tribunal's decision, stating that there was no satisfactory explanation for the delay in producing the evidence and that the Tribunal was justified in rejecting the application.

Conclusion:

The court dismissed the appeal, concluding that no substantial question of law arose. The findings of fact regarding concealment and inaccurate particulars of income were affirmed, and the penalty under section 271(1)(c) was upheld. The court noted that the appellant's reliance on various case laws was misplaced, as the factual matrix in those cases differed from the present case.