2012 (4) TMI 338 - HC - Income Tax

Penalty u/s 271 - Whether the appellate authorities were right in holding that the imposition, of penalty by the assessing authority in exercise of power under Sec. 271 (1)(c) of the IT Act 1961 is after satisfying himself that the non-disclosure of income warrants imposition of penalty - held that - the assessee had filed a return and had disclosed the income. However, later the assessee did file another return in response to the notice issued under Section 148 of the Act and in this return what had not been shown as income earlier but claimed as a cash credit was offered as income. The assessment was concluded on such premises. -In a situation where the assessee admits that a return which had been filed earlier did not disclose a true or full income, which is the case in the present situation, does not warrant proof or burden on the revenue to prove things, as it is well settled legal principle that any proof and manner of proof are all not required when there is an admission. Proof is required where it becomes a contentions issue and person asserting is required to make good his version. But in a situation where it is not contested, but admitted, production of proof is not necessary nor warranted in law. - both the appellate commissioner and the tribunal erred In setting aside the order of the assessing officer levying penalty - Decided against the assessee.

Summary

Issues Involved:
1. Reopening of assessment under Section 148 of the Income Tax Act.
2. Levy of penalty under Section 271(1)(c) of the Income Tax Act.
3. Maintainability of the appeal based on monetary limits as per the Board's circular.
4. Requirement of satisfaction for initiating penalty proceedings.
5. Validity of the explanation provided by the assessee.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 148 of the Income Tax Act:
The assessing officer reopened the assessment for the year 1996-97 upon discovering a cash credit entry of Rs. 4,50,000/- in the books of the assessee, which was not confirmed by the creditor, Sri Thimme Gowda. The assessee filed a fresh return in response to the notice under Section 148, disclosing the cash credit as income.

2. Levy of Penalty under Section 271(1)(c) of the Income Tax Act:
The assessing officer levied a penalty of Rs. 1,80,000/- under Section 271(1)(c) for furnishing inaccurate particulars of income. The assessee's explanation that the credit was a genuine transaction and the additional income was offered to buy peace did not convince the assessing officer. The appellate commissioner and the tribunal, however, set aside the penalty, citing lack of independent examination and procedural lapses.

3. Maintainability of the Appeal Based on Monetary Limits as per the Board's Circular:
The assessee raised a preliminary objection regarding the maintainability of the appeal, citing the Board's circular which restricts appeals to cases involving amounts above Rs. 4,00,000/-. The court, however, noted that the circular allows exceptions for cases involving substantial questions of law and admitted the appeal on these grounds.

4. Requirement of Satisfaction for Initiating Penalty Proceedings:
The tribunal had dismissed the penalty on grounds that the assessing officer did not record satisfaction before initiating penalty proceedings. The court, however, held that the assessing officer's awareness and direction to initiate penalty proceedings in the assessment order were sufficient to meet the requirement of satisfaction.

5. Validity of the Explanation Provided by the Assessee:
The court found that the assessee's explanation for the cash credit was not bona fide, as it was offered only after the assessment was reopened. The court referenced Supreme Court decisions indicating that offering income to buy peace does not negate the fact of concealment. The court concluded that the assessee had not furnished true particulars of income in the original return, justifying the penalty under Section 271(1)(c).

Conclusion:
The appeal by the revenue was allowed, and the order of the tribunal was set aside. The court restored the penalty imposed by the assessing officer, concluding that the assessee had indeed concealed income and furnished inaccurate particulars, thereby warranting the penalty under Section 271(1)(c) of the Income Tax Act.