2011 (2) TMI 1106 - HC - Income Tax

Penalty u/s 271(1)(c) - wrong claim of expenditure stating the same to be in the nature of revenue expenditure, whereas he could not substantiate his claim in that regard - Held that - In the absence of any independent finding by the Assessing Officer that the assessee either concealed his income or furnished inaccurate particulars, merely because the assessee treated it as a business loss, whereas the revenue treated it as a capital loss, the provisions contained under section 271(1)(c) - finding recorded by the Tribunal that the assessee did not conceal his income nor furnish the inaccurate particulars, are wholly justified and needs no interference. In favour of assessee.

Summary

Issues:
1. Classification of loss as business loss or capital loss.
2. Initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act.
3. Tribunal's decision on imposition of penalty for concealment of income.

Analysis:
1. The appellant, a Hindu Undivided Family (HUF), claimed a loss of Rs. 15,40,818 as a business loss, while the Revenue treated it as a capital loss. The Commissioner of Income-tax Appeals and the Tribunal upheld the Revenue's decision, stating that the assessee had concealed certain facts regarding the nature of the loss.

2. Subsequently, penalty proceedings under section 271(1)(c) of the Income Tax Act were initiated against the assessee based on the Tribunal's observation of concealment of expenditure claimed as revenue expenditure. The Deputy Commissioner and the CIT (Appeals) found the assessee guilty of concealment and imposed a penalty.

3. The assessee appealed to the Tribunal, arguing that for imposing a penalty under section 271(1)(c), there should be concealment of income or furnishing of inaccurate particulars, which were not present in this case. The Tribunal agreed, stating that the conditions for penalty were not met as there was no deliberate mistake in the original return and no concealment of income. Therefore, the Tribunal set aside the penalty imposed by the Deputy Commissioner and the CIT (Appeals).

4. The High Court, after considering the arguments, upheld the Tribunal's decision, stating that without independent findings by the Assessing Officer on concealment of income or furnishing inaccurate particulars, the provisions of section 271(1)(c) would not apply solely based on the difference in classification of the loss. The Court agreed that there was no concealment or furnishing of inaccurate particulars by the assessee and dismissed the appeal, emphasizing the absence of mens rea for concealment.