2011 (4) TMI 196 - HC - Income Tax

Penalty u/s 271(1)(c) - concealment of income and furnishing inaccurate particulars - disallowing the loss - the assessee had filed the original return for the assessment year 1998-99 on 29.10.1998 which was revised claiming a loss of Rs.10, 00, 000/-on account of debit notes issued by the Maruti Udyog Limited on 21.10.1999 - The assessee for the next assessment year 1999-2000 filed return on 16.12.1999 in which it had again claimed loss of Rs.10, 00, 000/- which had already been claimed for the assessment year 1998-99 - Thus the assessee had claimed loss of Rs.10, 00, 000/- twice over i.e. one in the return filed for the assessment year 1998-99 and second time in the return filed for the assessment year 1999-2000 - The Tribunal while upholding the penalty under Section 271(1)(c) of the Act had recorded that the Explanation furnished by the assessee was not bonafide and the assessee was unable to substantiate its version. The explanation of assessee that the amount was claimed in assessment year 1998-99 on legal advice - There is no evidence to that effect on record - It was also explained that claim in this year was merely a clerical mistake - It has been held that this explanation is not bonafide because the assessee could not have forgotten that this very amount was claimed in the return for assessment year 1998-99 less than two months ago - The claim was a very big amount and it materially altered its income. Held that the Tribunal had concluded that the assessee had furnished inaccurate particulars of income and the same had been done deliberately - The levy of penalty under Section 271(1)(c) of the Act had thus rightly been sustained - The appeal is allowed in favour of the revenue.

Summary

Issues:
1. Whether penalty under Section 271(1)(c) of the Income Tax Act, 1961 was justified based on the facts and circumstances of the case.
2. Whether the assessee furnished inaccurate particulars of income deliberately, justifying the penalty imposed.

Analysis:

Issue 1:
The appeal was filed by the assessee under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal. The main contention was regarding the levy of penalty under Section 271(1)(c) of the Act. The facts revealed that the assessee had claimed a loss of Rs.10,00,000 twice, once for the assessment year 1998-99 and again for the assessment year 1999-2000. The Tribunal upheld the penalty under Section 271(1)(c) stating that the explanation provided by the assessee was not bonafide and could not be substantiated. The Tribunal referred to Explanation I of Section 271(1)(c) which places the initial onus of offering an explanation on the assessee. The Tribunal found that the explanation provided by the assessee was not bonafide as there was no evidence to support the claim that the amount was claimed in the previous year based on legal advice. The Tribunal concluded that the assessee had furnished inaccurate particulars of income deliberately, justifying the penalty imposed.

Issue 2:
The Tribunal's decision was based on the fact that the assessee had claimed the same amount twice over, without disclosing material facts at the time of making the claim for the second time. The Tribunal emphasized that substantial tax was involved in the default committed by the assessee. It was noted that the levy of penalty under Section 271(1)(c) is not mandatory but becomes obligatory when the same claim is made twice over without disclosing material facts. The Tribunal held that the penalty was rightly levied and upheld by the lower authorities, as the default committed by the assessee was not a technical or venial default. The Tribunal found no reason to interfere with the order of the Commissioner of Income Tax (Appeals) and concluded that the penalty under Section 271(1)(c) of the Act had been rightly sustained.

In conclusion, the High Court upheld the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, against the assessee based on the deliberate furnishing of inaccurate particulars of income. The appeal was dismissed, and the questions of law were answered against the assessee and in favor of the revenue.