2007 (7) TMI 35 - HC - Income Tax

Concealment of income - AO contended that assessee had concealed income and accordingly imposed penalty u/s 271(1)(c) of the ITA 1961 - Held that concealment of income was not proved and accordingly penalty were set aside

Summary

Issues:
1. Penalty under Section 271(1)(c) for concealment of income.
2. Filing revised return after survey operation under Section 133A.

Issue 1: Penalty under Section 271(1)(c) for concealment of income:
The case involved the imposition of a penalty under Section 271(1)(c) of the Income Tax Act for alleged concealment of income by the assessee. The assessing officer held that the assessee concealed income amounting to Rs. 22,65,900 and imposed a penalty of Rs. 8,08,925. The Commissioner of Income Tax Appeals allowed the assessee's appeal, stating that the assessing officer failed to prove that the expenses were not actually incurred by the assessee. The Income Tax Appellate Tribunal upheld this decision, citing a previous court ruling that mere addition of income by disallowing expenses does not constitute concealment. The Revenue contended that the revised return filed after the survey operation was an admission of concealment, invoking Section 271(1)(c) which covers both concealment and incorrect particulars.

Issue 2: Filing revised return after survey operation under Section 133A:
The assessee, engaged in clearing and forwarding business, filed a revised return after a survey operation under Section 133A revealed discrepancies in expense vouchers. The assessing officer argued that the revised return, admitting additional income, was a result of the survey and constituted concealment. However, the Supreme Court precedent in Dilip N. Shroff v. Joint Commissioner of Income Tax clarified that imposition of penalty for concealment is not automatic and must consider various factors. The court emphasized that deliberate acts of concealment or furnishing inaccurate particulars are required, and the burden of proof shifts to the assessee under the Explanation to Section 271(1)(c). In this case, the court found that the inability to produce proper vouchers did not amount to concealment, especially considering the nature of the business and the expenses already reflected in the books of accounts.

In conclusion, the High Court dismissed the appeal, affirming that the imposition of penalty under Section 271(1)(c) was impermissible in this case as there was no deliberate act of concealment or furnishing inaccurate particulars by the assessee. The court's decision was based on the facts presented and the interpretation of relevant legal provisions and precedents, highlighting the importance of fair and objective assessment in penalty proceedings related to income concealment.