2011 (3) TMI 1014 - HC - Income Tax

Penalty u/s 271(1)(c)- assessee had not complied with the provisions of Section 94(7) while furnishing its return of income - Held that - In the opinion of the Tribunal, the judicial enunciations relied upon by the CIT(A) for deleting the penalty, were not applicable to the resolution of the controversy in hand and were clearly distinguishable on facts, and it was a clear case of non-compliance of Explanation-1 to Section 271(1)(c) of the Act. The Tribunal while embarking on the above issue observed that in the instant case the facts relating to disallowance of loss as per the provisions of sub-section (7) of Section 94 of the Act were not disclosed by the assessee in the return filed, and even if some explanation was offered by the assessee, the same was not bona fide because no reason had been given by the assessee for not making disallowance under Section 94(7) of the Act. No perversity or illegality could be pointed out by the learned counsel for the assessee in the findings recorded by the Tribunal that may persuade this Court to interfere therewith

Summary

Issues:
1. Imposition of penalty under Section 271(1)(c) of the Income-Tax Act, 1961.
2. Application of Explanation 1(B) of Section 271(1)(c) in the case.
3. Compliance with provisions of Section 94(7) of the Act in furnishing income tax return.
4. Justification of the penalty imposed by the Assessing Officer.

Analysis:

Issue 1: Imposition of penalty under Section 271(1)(c) of the Income-Tax Act, 1961
The appeal was filed against the order of the Income Tax Appellate Tribunal regarding the imposition of a penalty of Rs. 3,14,478 under Section 271(1)(c) of the Act. The Tribunal upheld the penalty imposed by the Assessing Officer, disagreeing with the deletion of the penalty by the Commissioner of Income-tax (Appeals). The Tribunal observed that the assessee failed to disclose facts relating to the disallowance of loss under Section 94(7) of the Act, and even if explanations were offered, they were not considered bona fide. The Tribunal applied Explanation-1 to Section 271(1)(c) and concluded that the penalty was rightly imposed by the Assessing Officer.

Issue 2: Application of Explanation 1(B) of Section 271(1)(c)
The Tribunal analyzed the provisions of Explanation-1 to Section 271(1)(c) of the Act, which states that if an assessee fails to offer an explanation for any material fact relevant to the computation of total income, the amount added or disallowed shall be considered as concealed income. The Tribunal found that the assessee did not disclose facts related to the disallowance of loss under Section 94(7) and failed to provide a valid reason for non-compliance. As per the Tribunal's analysis, the Explanation-1 was directly applicable in this case, justifying the penalty imposed by the Assessing Officer.

Issue 3: Compliance with provisions of Section 94(7) of the Act
The Tribunal noted that the assessee, engaged in the business of purchase and sale of shares, had suffered a loss on the sale of shares. The assessing officer disallowed the amount under Section 94(7) and imposed a penalty under Section 271(1)(c) for alleged concealment. The Tribunal observed that the assessee did not comply with the provisions of Section 94(7) while filing the income tax return, leading to the imposition of the penalty.

Issue 4: Justification of the penalty imposed by the Assessing Officer
The Tribunal upheld the penalty imposed by the Assessing Officer, stating that the assessee was aware of the relevant provisions and failed to disclose necessary facts. The Tribunal found no merit in the arguments presented by the appellant's counsel, emphasizing that the penalty was rightly imposed under Section 271(1)(c) of the Act. The Tribunal dismissed the appeal, stating that the substantial questions of law claimed did not arise in the case.

In conclusion, the High Court dismissed the appeal, upholding the imposition of the penalty under Section 271(1)(c) based on the non-disclosure of material facts and non-compliance with the provisions of the Income-Tax Act.