2010 (9) TMI 239 - HC - Income Tax

Penalty under Section 271(1)(c) of the Act - liability on the assessee for concealment or for giving inaccurate particulars while filing the return - held that - assessee had made full disclosure and there was neither any concealment of income nor furnishing of inaccurate particulars - appeal being devoid of merits is dismissed

Summary

Issues:
Challenge to penalty under Section 271(1)(c) of the Income Tax Act, 1961 based on interpretation of relevant legal provisions and precedents.

Analysis:
The appeal was filed challenging the order of the Income Tax Appellate Tribunal imposing a penalty under Section 271(1)(c) of the Income Tax Act for the Assessment Year 2003-2004. The Tribunal had deleted the penalty, leading to the appeal. The counsel for the revenue argued that the Tribunal erred in law by dismissing the appeal. Reference was made to a judgment of the Supreme Court in a similar case to support the argument.

The interpretation of Section 271(1)(c) by the Supreme Court was crucial in this case. The Supreme Court's decision highlighted the element of strict liability on the assessee for concealment or providing inaccurate particulars while filing the return. The Court emphasized that mens rea was not necessary to attract the penalty under this section. The objective behind this provision was seen as providing a remedy for loss of revenue, making the penalty a civil liability.

Further, the judgment in Commissioner of Income Tax vs. Reliance Petroproducts Pvt. Ltd. was cited, emphasizing the importance of accurate particulars in the return to determine the liability for penalty under Section 271(1)(c). The Court clarified that a mere unsustainable claim in the return would not amount to furnishing inaccurate particulars regarding the income of the assessee.

In the present case, both the Commissioner of Income Tax (Appeals) and the Tribunal provided detailed reasons for setting aside the penalty under Section 271(1)(c). The Tribunal's order highlighted the assessee's full disclosure of income and expenses, following the matching concept. The Tribunal found no concealment of income or furnishing of inaccurate particulars, leading to the conclusion that the penalty was not justified. The explanation offered by the assessee was deemed bona fide by both authorities, resulting in the dismissal of the appeal against the penalty.

Ultimately, the High Court upheld the decision of the lower authorities, ruling that the respondent-assessee was not liable to pay the penalty under Section 271(1)(c) as there was no concealment or furnishing of inaccurate particulars. The appeal was dismissed, emphasizing the bonafide nature of the explanation provided by the assessee.