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2011 (6) TMI 227 - HC - Income TaxSearch and seizure - Penalty - Addition - Concealment of income - mere omission or negligence would not constitute a deliberate act of suppressio veri or suggestio falsi - Mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of assessee and such a claim can not amount to furnishing inaccurate particulars - The prima facie satisfaction of the Assessing Officer that the case may deserve the imposition of penalty, can be discerned from the order passed during the course of assessment proceeding - It is also because the question of law on which the appeal was admitted was under Section 271(1)(c) and not under Section 158BFA(2) of the Act - Decided against the assessee
Issues Involved:
1. Justification of the Tribunal in reversing the order of the CIT(A) who deleted the penalty under Section 271(1)(c) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Tribunal's Reversal of CIT(A)'s Order: The primary issue revolves around whether the Tribunal was justified in reversing the order of the CIT(A) who deleted the penalty of Rs. 10,01,684/- under Section 271(1)(c) of the Income Tax Act. Facts and Background: A search and seizure operation was conducted at the premises of the appellant, during which certain documents were seized. The Assessing Officer (AO) made additions based on these documents, which were not recorded in the books of accounts. The assessee claimed these amounts were spent by the Director from the company's imprest account, but this explanation was not accepted by the AO. The CIT(A) initially upheld the additions made by the AO, disbelieving the assessee's plea regarding the imprest account. Tribunal's Reasoning: The Tribunal explained the concept of an imprest account and noted that the entries regarding the spending of money by the Director were not recorded in the books of accounts until much later. The Tribunal found that the non-recording of these expenses for over two years could not be accepted as a mistake or inadvertence. The Tribunal upheld the additions made by the AO, reasoning that the expenditures were not recorded contemporaneously and thus were considered undisclosed income. Penalty Proceedings: Post the Tribunal's order in quantum proceedings, the AO provided an opportunity to the assessee to explain, which was reiterated by the assessee. However, the AO maintained the penalty, which was later deleted by the CIT(A) on the grounds that the AO was not justified in levying the penalty merely because the additions were upheld by the Tribunal. Tribunal's Final Judgment on Penalty: The Tribunal reversed the CIT(A)'s order, emphasizing that the addition was based on documentary evidence found in the possession of the Director, which belonged to the assessee company. The Tribunal held that the explanation given by the assessee was found to be incorrect, and thus, the penalty was rightly levied by the AO. Legal Arguments and Precedents: The assessee's counsel argued that the case did not involve concealment of income or furnishing of inaccurate particulars, emphasizing that the primary burden of proof was on the Revenue. Various judgments were cited to support the argument that mere omission or negligence does not constitute a deliberate act of concealment or furnishing inaccurate particulars. Court's Analysis: The court analyzed the facts, noting that the explanation of the imprest amount was an afterthought and the explanation furnished by the assessee was evidently false. The court found that the AO had recorded prima facie satisfaction that the unexplained amount of expenditure was the unexplained income, establishing that there was a clear case of furnishing inaccurate particulars of income. Conclusion: The court concluded that the AO had arrived at satisfaction during the course of proceedings before initiating penalty proceedings. The court agreed with the finding that there existed prima facie satisfaction discernible from the order of the AO. Consequently, the court answered the question in the affirmative, in favor of the Revenue, and against the assessee, thereby dismissing the appeal.
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