2014 (6) TMI 947 - HC - Income Tax

Penalty under Section 271(1)(c) - difference in valuation of stock and expenses on staff and coolie - Held that - As after the returns were filed, in the course of survey proceedings, it was found that there was difference in valuation of stock and expenses on staff and coolie. The assessee without a murmur filed second revised return and offered it for tax and paid tax and interest promptly. In the course of assessment proceedings, the assessee tried to justify its returns and had produced before the authorities all its books of account, invoices, check post certificates and delivery notes. When the Assessing Authority called upon the assessee to secure the confirmation letters and also to produce the creditors before him, the assessee was successful in getting confirmation letters from everyone, but could not produce some of the creditors. Only in respect of those creditors whose presence it could not secure which was six in number, the assessee agreed to write off the said persons and offered it for tax. Hence, the assessee was called upon to file second revised returns which it promptly filed and paid the tax with interest. It is not a case where the assessee did not offer any explanation nor the explanation offered by it was found to be false or not found to- be bona fide. Partially it was successful in proving its defense. Therefore, it is a case where, the assessee was not successful in establishing his defense. Therefore, there was no intention either to suppress information or to file any incorrect statement. At this juncture it is pertinent to note that in the notice issued to the assessee, the department has not made it clear what is the accusation against the assessee and it was full of blanks. In those circumstances, the Tribunal on proper consideration of the entire material on record and after taking note of the law on the point as decided by the various courts, rightly held that there is no suppression of material facts and was justified in setting aside the order passed by the First Appellate Authority as well as the Assessing Authority. - Decided in favour of the assessee

Summary

Issues Involved:
1. Whether the Tribunal was right in holding that there was no concealment of income nor did the assessee furnish inaccurate particulars of income to levy penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Whether the Tribunal was right in not taking into consideration the revised returns filed by the assessee after a survey was conducted, which indicated concealment of income.

Detailed Analysis:

Issue 1: Tribunal's Decision on Concealment of Income and Inaccurate Particulars
The Tribunal held that there was no concealment of income or furnishing of inaccurate particulars by the assessee. It noted that the assessee had voluntarily offered additional income to buy peace with the Department due to the inability to produce some creditors before the Assessing Officer. The Tribunal found that the purchases made by the assessee were not disputed and were supported by evidence such as purchase invoices and proof of movement of goods through sales tax check posts. The Tribunal concluded that the inability to produce certain creditors did not amount to concealment of income or furnishing inaccurate particulars. Consequently, it set aside the penalty imposed under Section 271(1)(c) of the Act.

Issue 2: Consideration of Revised Returns Indicating Concealment of Income
The Tribunal did not agree with the Revenue's contention that the revised returns filed by the assessee after the survey indicated concealment of income. The assessee initially filed a return declaring an income of Rs. 13,95,200/-, which was revised to Rs. 30,45,200/- after a survey, and further revised to Rs. 1,16,46,350/-. The Tribunal observed that the revisions were due to the assessee's inability to produce some creditors and to avoid further disputes with the Department. The Tribunal emphasized that the purchases were genuine and supported by evidence. The Tribunal also noted that the assessee promptly paid the taxes and interest on the revised income, indicating a bona fide intention rather than an attempt to conceal income.

Additional Observations:
- The Tribunal highlighted that no incriminating material was found during the survey.
- The assessee produced all relevant books of accounts, invoices, check post certificates, and delivery notes.
- The Tribunal noted that the assessee was able to produce confirmation letters from several creditors and only six creditors could not be produced.
- The Tribunal found that the penalty notice issued to the assessee was vague and did not specify the grounds for the penalty, which violated principles of natural justice.

Conclusion:
The High Court upheld the Tribunal's decision, dismissing the Revenue's appeal. The Court agreed that the Tribunal had correctly assessed the evidence and circumstances, concluding that there was no concealment of income or furnishing of inaccurate particulars by the assessee. The substantial questions of law were answered in favor of the assessee and against the Revenue. The appeal was dismissed with no costs.