2012 (5) TMI 54 - AT - Income Tax

Levy of penalty under section 271(1)(c) - assessee contested that a similar addition made for A.Y. 2003-04 stands deleted by the Ld. CIT(A) in first appeal Held that - Such collection towards share deposit account was not in the nature of revenue receipt and hence was not taxable - the claim of the assessee was on bona fide belief of past accounting practice and legal interpretation - the assessee has disclosed the complete facts in the books of accounts and return of income - it is duty of the AO to compute total income in accordance with law on the basis of particulars filed by the assessee - there is no finding that the explanation furnished by the assessee was false - the AO himself did not disallow such amount in earlier years as well as in subsequent years - penalty under section 271(1)(c) is not leviable -The order of CIT(A) is confirmed.- in favour of assessee.

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

Levy of Penalty under Section 271(1)(c):

The Revenue appealed against the order dated 25.10.2010 by the CIT(A), Ghaziabad, for the Assessment Year 2002-03, contesting the deletion of penalty levied under section 271(1)(c) of the Income Tax Act, 1961. The core issue was the penalty levied due to the addition of Rs. 90,23,233/- by the Assessing Officer, which was confirmed by the I.T.A.T. in the quantum appeal.

The Assessing Officer's basis for the penalty was that the assessee furnished inaccurate particulars of income. However, the CIT(A) deleted the penalty, noting that the assessee had claimed similar deductions in past years without any additions being made, and even when additions were made, they were deleted. The CIT(A) also highlighted that his predecessor had taken a different stand on this issue for the Assessment Year 2003-04, ruling that the collection towards the share deposit account was not revenue in nature and hence not taxable. The CIT(A) further observed that the I.T.A.T.'s decision in the quantum matter was based on legal interpretation and that the assessee's claim was made on a bona fide belief grounded in past accounting practices and legal interpretations.

The tribunal examined the penalty proceedings under section 271(1)(c), emphasizing that such proceedings can only be initiated if the Assessing Officer or the first appellate authority is satisfied during any proceedings under the Act that any person has concealed particulars of income or furnished inaccurate particulars. The tribunal noted that the expressions "has concealed the particulars of income" and "has furnished inaccurate particulars of income" are not defined in the Act, but they imply a duty on the assessee to make a correct and complete disclosure of income. The tribunal explained that the penalty under section 271(1)(c) is a civil liability and does not require willful concealment.

The tribunal further elaborated on the explanations to section 271(1)(c). Explanation 1 states that if an assessee fails to offer an explanation, offers a false explanation, or offers an explanation that is not substantiated and fails to prove that it is bona fide, the amount added or disallowed will be deemed to represent the income in respect of which particulars have been concealed. The tribunal emphasized that the initial burden of rebuttal is on the assessee, and if the assessee fails to discharge this burden, the presumption of concealment or furnishing inaccurate particulars arises.

The tribunal also referenced several judicial pronouncements, including the Supreme Court's decisions in Dharmendra Textile Processor and Reliance Petroproducts Pvt Ltd, which clarified the interpretation of section 271(1)(c). The tribunal noted that these decisions underscored that a bona fide omission cannot justify penalty and that the penalty provisions should not be invoked based on routine and general presumptions.

In the case under consideration, the tribunal found that the assessee had collected Rs. 90,23,233/- from the purchase price given to farmers for the issuance of shares, which could not be issued due to the lack of sanction from the State Government. The tribunal observed that in earlier and subsequent years, no such addition was made, and the assessee had disclosed all relevant particulars in its books of accounts and return of income. The tribunal concluded that the assessee had not furnished inaccurate particulars of income and that the explanation provided was bona fide, given that the Assessing Officer did not disallow such amounts in other years.

Therefore, the tribunal upheld the CIT(A)'s decision to cancel the penalty of Rs. 27,61,108/-, finding that this was not a fit case for levying penalty under section 271(1)(c). Consequently, the appeal filed by the Revenue was dismissed.

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