2012 (6) TMI 438 - HC - Income Tax

Penalties u/s 271(1)(c) - held that - there was no mens rea for concealment of income which had formed the basis for making additions to the income of the assessee. The assessee had disclosed the G. P. rate of 22 per cent. in the revised return and on that basis the intentional concealment could not be held. Further, the Assessing Officer had not found any sales or purchases outside the books of account and if there had been any intention in the mind of the assessee, the latter would have erased those cuttings. - no penalty - decided in favor of assessee.

Summary

Issues:
Penalties imposed under section 271(1)(c) of the Income-tax Act, 1961 for concealed income and undisclosed deposits.

Analysis:
1. The case involved penalties imposed under section 271(1)(c) of the Income-tax Act, 1961 for concealed income and undisclosed deposits during the assessment year 1982-83. The assessee had suppressed the value of closing stock and undisclosed deposits were found, leading to penalties imposed by the Assessing Officer. The Commissioner of Income-tax (Appeals) accepted the assessee's appeal against the penalties, which was further upheld by the Income-tax Appellate Tribunal, resulting in the Revenue filing an appeal challenging these decisions.

2. The key legal questions proposed by the appellant for determination were whether penalties could be imposed for concealed income disclosed in a revised return before regular assessment and whether bank deposits and cash credits could be treated as concealed income if all material facts were disclosed. The Tribunal, in upholding the order of the Commissioner of Income-tax (Appeals), emphasized that there was no mens rea for concealment of income and that intentional concealment could not be established based on the facts presented.

3. The Tribunal highlighted that the difference in valuation of stocks was due to a lower Gross Profit (G. P.) rate and not quantitative suppression by the assessee. It was noted that no sales or purchases outside the books of account were detected, and the assessee voluntarily produced the books of account before the Assessing Officer. The Tribunal also emphasized that the revised return filed by the assessee to correct errors in the valuation of closing stock was within legal rights, citing precedent from a previous High Court case.

4. Furthermore, the Tribunal found that the addition of certain amounts to the assessee's income, such as Rs. 18,000 withdrawn from another entity's books and wrongly credited to the assessee's bank account, was unintentional and supported by plausible explanations. Similarly, the explanation for cash credits totaling Rs. 26,000 was accepted by the appellate authorities, leading to the deletion of penalties imposed by the Assessing Officer.

5. Ultimately, the Tribunal concluded that the concurrent findings of fact by the appellate authorities below, based on evidence and appreciation of facts, did not warrant interference. The Tribunal found no illegality or perversity in the decisions made by the lower authorities and dismissed the appeal, upholding the deletion of penalties imposed under section 271(1)(c) of the Income-tax Act, 1961.