2011 (1) TMI 627 - HC - Income Tax

Penalty levied u/s 271(1)(c) - the Assessing Officer has relied on the submissions of the parties namely M/s. Abhi Dyes and M/s. Pooja Dye Chem in the case of Vardhaman Fabrics Pvt. Ltd. that they have given bogus bills and have not actually sold any goods. The Assessing Officer after investigation has not brought any material on record to show that these parties have not sold any goods to the assessee and have given bogus bills which has been shown by the assessee in its books of accounts. Without bringing any such material the Assessing Officer could not have come to a definite conclusion that the assessee has filed inaccurate particulars of its income or has concealed its income in order to avoid payment of tax. The Assessing Officer has merely accepted the surrender made by the assessee. This is good as far as the assessment is concerned but in order to levy penalty the Assessing Officer has to conclusively establish that the assessee has concealed its income or has filed inaccurate particulars of income. In the absence of any evidence to this effect in our considered opinion the Assessing Officer was not justified in levying penalty of Rs.5, 82, 287/-. Hence we set aside the orders of the lower authorities and delete the penalty of Rs.5, 82, 287/-.

Summary

Issues Involved:
Challenge to deletion of penalty under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.

Detailed Analysis:

Issue 1: Challenge to Deletion of Penalty
The appellant revenue challenged the deletion of penalty under section 271(1)(c) of the Income Tax Act by the Tribunal. The respondent assessee, a private limited company, was engaged in dyeing and printing work on a job work basis. The assessing officer added an amount on account of bogus purchases of colors and chemicals and imposed a penalty for furnishing inaccurate particulars of income. The Commissioner (Appeals) dismissed the appeal, leading the assessee to approach the Tribunal. The Tribunal, in its impugned order, deleted the penalty.

Analysis:
The appellant contended that the Tribunal erred in concluding that penalty could not be levied as the assessee had surrendered income during assessment proceedings. The appellant argued that the assessing officer had conclusively established the purchases in question were bogus, and the Tribunal should not have reversed the Commissioner (Appeals) order. The Tribunal, however, found that the assessing officer did not conclusively prove that the assessee filed inaccurate particulars of income. The Tribunal highlighted that the assessing officer accepted the surrender made by the assessee without bringing any material to show the purchases were bogus. The Tribunal emphasized that for penalty imposition, the assessing officer needed to conclusively establish concealment of income or filing inaccurate particulars, which was lacking in this case.

Conclusion:
The Tribunal's decision to delete the penalty was based on the lack of conclusive evidence of the assessee concealing income or providing inaccurate particulars. The Tribunal correctly applied the legal standard that the burden of proof in penalty proceedings is different from assessment proceedings. The Tribunal's decision aligns with legal precedents that findings in assessment orders are not conclusive for penalty imposition. Therefore, the High Court dismissed the appeal as no substantial question of law arose for consideration.