2010 (9) TMI 246 - HC - Income Tax

Penalty (under Section 271(1)(c)) - concealment of income and furnishing inaccurate particulars - Held that - claim was not upheld by the Tribunal, it cannot be said that assessee has furnished inaccurate particular and concealed particulars of his income - assessee had made full disclosure and there was neither any concealment of income nor furnishing of inaccurate particulars - assessee had made full disclosure and there was neither any concealment of income nor furnishing of inaccurate particulars - assessee is not liable to pay penalty under Section 271(1)(c) of Act and thus the present appeal is dismissed

Summary

Issues:
Challenge to penalty under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2002-2003.

Analysis:
The appeal was filed challenging the Income Tax Appellate Tribunal's order deleting the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Act. The appellant argued that the Tribunal erred in law, citing a judgment of the Supreme Court in Union of India vs. Dharamendra Textile Processors, which interpreted Section 271(1)(c) indicating strict liability on the assessee for concealment or inaccurate particulars in the return.

The Supreme Court's decision in Union of India vs. Dharamendra Textile Processors overruled the decision in Dilip N. Shroff vs. Joint CIT and emphasized the element of strict liability on the assessee for concealment or inaccurate particulars. The Court clarified that mens rea was not necessary to attract the penalty under Section 271(1)(c) as it indicated strict liability on the assessee for concealment or inaccurate particulars while filing the return.

In Commissioner of Income Tax vs. Reliance Petroproducts Pvt. Ltd., the Supreme Court reiterated that the conditions under Section 271(1)(c) must exist before imposing the penalty. The Court highlighted that mens rea was essential for the penalty under Section 271(1)(c) and that furnishing inaccurate particulars required a deliberate act or omission by the assessee.

Both the Commissioner of Income Tax (Appeals) and the Tribunal provided detailed reasons for setting aside the penalty under Section 271(1)(c) in the present case. They found that the assessee had made a bonafide claim regarding expenditure, disclosing all particulars. The Tribunal concluded that the claim, even if not upheld, did not amount to furnishing inaccurate particulars or concealing income, as the assessee's explanation was substantiated and bonafide.

Ultimately, the High Court upheld the decision of the Commissioner and Tribunal, ruling that the respondent-assessee had made full disclosure without any concealment or inaccurate particulars. The explanation offered by the respondent-assessee was found to be bonafide, falling within the ambit of Explanation 1 to Section 271 of the Act. Consequently, the respondent-assessee was not liable to pay the penalty under Section 271(1)(c), and the appeal was dismissed with no costs.