2010 (3) TMI 714 - AT - Income Tax

Penalty Concealment of income - The assessee claimed that the entire profit of Rs. 2,25,36,542 was eligible for exemption under s. 10B of the Act - AO issued a show-cause notice under s. 274 r/w s. 271(1)(c) of the Act to the assessee Assessee submitted that return were filed on the basis of audited accounts and the exemption u/s 10B was claimed by furnishing the report in Form no. 56G r/w r. 16B of the IT Rules, 1962, so all the facts were disclosed to the AO - Wherever there is a difference between the returned and assessed income, there is an inference of concealment, as a rule of law as would be clear from Expln. 1 to s. 271(1)(c) of the Act - In the instant case also the assessee gave a bona fide explanation and unreservedly gave all the documents and information without withholding any information relating to the computation of its total income - Accordingly the appeal is dismissed

Summary

Issues Involved:
1. Deletion of Penalty for Concealment of Income
2. Bona Fide Belief and Disclosure of Facts
3. Application of Section 271(1)(c) of the IT Act

Detailed Analysis:

1. Deletion of Penalty for Concealment of Income:
The primary issue in this case revolves around the deletion of a penalty amounting to Rs. 7,96,200, which was levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The AO had determined that the assessee had concealed income by claiming an excess exemption under Section 10B of the Act. The penalty was imposed because the assessee did not receive Rs. 29,48,843 of the export proceeds within the extended period granted for bringing the amount into India. The AO argued that the assessee had claimed exemption on the entire export sales despite knowing that this amount was not received within the stipulated time.

2. Bona Fide Belief and Disclosure of Facts:
The assessee contended that the return of income was filed based on audited accounts and a report in Form No. 56G, which disclosed all relevant facts. The assessee argued that the exemption under Section 10B was claimed in good faith, based on the belief that the remaining export proceeds would be received within the extended period. The CIT(A) accepted this explanation, holding that the concealment of income was not established, and thus, no penalty was leviable. The Tribunal initially upheld this view, noting that the assessee's claim was bona fide and based on the chartered accountant's report, and that no particulars were concealed from the Department.

3. Application of Section 271(1)(c) of the IT Act:
The Revenue appealed against the Tribunal's decision, arguing that the assessee's failure to inform the AO about the non-receipt of Rs. 29,48,843 indicated a lack of bona fides, making the penalty under Section 271(1)(c) applicable. The High Court remitted the case back to the Tribunal, instructing it to consider the developments post the chartered accountant's report, including the extensions granted and the non-receipt of the amount within the extended period.

Upon re-evaluation, the Tribunal provided a fresh opportunity for both parties to present their arguments. The Departmental Representative argued that the assessee's intention was mala fide, citing various judicial precedents to support the imposition of penalty for concealment. Conversely, the assessee's counsel reiterated that the claim was made in good faith, supported by the chartered accountant's report, and that substantial sums were received within the extended period, leaving only Rs. 29,48,843 uncollected. The Tribunal concluded that the assessee's belief was bona fide and that no particulars were concealed, thereby upholding the CIT(A)'s order to delete the penalty.

The Tribunal emphasized that penalty under Section 271(1)(c) is not automatic and must be based on the assessee's conduct at the time of filing the return. Since the assessee had a bona fide belief that the remaining export proceeds would be received within the extended period, the penalty for concealment was not justified. The Tribunal distinguished this case from others cited by the Departmental Representative, noting that the facts supported the assessee's bona fide belief and full disclosure of relevant information.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the penalty under Section 271(1)(c) of the IT Act, 1961. The Tribunal held that the assessee's bona fide belief and full disclosure of facts negated the charge of concealment of income, making the imposition of penalty unjustified.