2014 (11) TMI 1099 - HC - Income Tax

Penalty levied under Section 271(1)(c) - no return of income had been filed by the assessee - Held that - The penalties were upheld as it was only estimated value on which estimates of income tax was made and the books of accounts were rejected. There was no scope to levy the penalty under Section 271(1)(c) the appellant had been assessed by the Income Tax. The Tribunal has very rightly considered that both the additions are on an estimated basis. Therefore just because estimates are made penalty cannot be levied under Section 271(c). We are unable to persuade ourselves to take a different view than that taken by the Tribunal as well as CIT (Appeals)

Summary

Issues involved:
1. Concealment of income and penalty under Section 271(1)(c) of the Income Tax Act.
2. Applicability of penalty for concealment of income in the absence of filed return.
3. Interpretation of provisions regarding deemed concealment and penalties under the Income Tax Act.

Issue 1: Concealment of income and penalty under Section 271(1)(c) of the Income Tax Act:
The appellant argued that the opponent had concealed income, citing discrepancies found during a search and subsequent assessment. The appellant contended that the failure to file a return of income itself constituted concealment, attracting Section 271(1)(c). The appellant emphasized that penal provisions should be upheld to prevent non-compliance and reward accurate reporting. The Tribunal, however, held that penalty for concealment could not be levied as income was assessed on an estimated basis, and no return had been filed by the assessee.

Issue 2: Applicability of penalty for concealment of income in the absence of filed return:
The primary contention revolved around whether penalty under Section 271(1)(c) could be imposed when no return of income had been filed by the assessee. The CIT(A) deleted the penalty, stating that concealment can only be with reference to a filed return, and in the absence of a return, it cannot be concluded that the assessee concealed income. The Appellate Authority further emphasized that since the income was assessed on an estimated basis, the penalty for concealment of income was not applicable.

Issue 3: Interpretation of provisions regarding deemed concealment and penalties under the Income Tax Act:
The CIT(A) highlighted that the concept of deemed concealment introduced in the Income Tax Act was not applicable in this case due to the date of search being before the introduction of the provision. The penalties were upheld based on the fact that the additions were made on an estimated basis, and the Tribunal correctly considered that penalty under Section 271(1)(c) could not be imposed solely on estimates. The Tribunal and CIT (Appeals) concurred on the inapplicability of penalties in this scenario, leading to the dismissal of the Tax appeal.

In conclusion, the judgment delved into the nuances of concealment of income, penalties under Section 271(1)(c), and the significance of filing returns in determining liability. The decision underscored the importance of accurate reporting and the limitations on imposing penalties based solely on estimated assessments, ultimately dismissing the Tax appeal in alignment with the Tribunal and CIT (Appeals) decisions.