2012 (10) TMI 94 - HC - Income Tax

Penalty u/s 271(1)(C) - re-opening of the assessment - concealment and upward revision of income - ITAT deleted the addition - Held that - It appears from re-computation of the income that the total income of the assessee has been accepted as per the order passed under Section 143(3)/251 and the income assessed is Rs. 2,51,13,270/-. Out of this income, the addition has been disallowed in view of the explanation furnished by the assessee and which has been accepted by the AO and thus, deletion of Rs. 54,21,878/- resulted into net income at Rs. 1,96,91,390/-. Also the assessee s revised return showing profit to the tune of 27.5% was initially not accepted by the AO and he declared the profit to be 31% and that finding has been set aside in appeal and the assessee s profit has been accepted to be 27.5% as shown in the revised return meaning thereby, the assessee s income to the tune of 27.5% includes the relevant entry of Rs. 50 lakhs which is the amount deposited in the Bank of Tokyo, New Delhi Branch. As in the assessment order there is no finding of the AO that the assessee was guilty of concealing the income which AO could have recorded as provided under Section 271(1), initiation of proceeding under Section 271(1)(C) was not justified - in favour of assessee.

Summary

Issues:
1. Justification of Tribunal in absolving penalty under Section 271(1)(C) of the Income Tax Act, 1961.
2. Deletion of penalty amounting to Rs. 39,65,561.

Issue 1:
The appellant contended that the Tribunal erred in absolving the penalty under Section 271(1)(C) by holding there was no concealment of income. The appellant argued that the assessee failed to disclose a deposit of Rs. 50 lakhs in the Bank of Tokyo, New Delhi Branch, leading to an increase in reported profit from 20% to 27.5%. The Assessing Officer found this to be a clear case of concealment, a decision upheld by the CIT (Appeals) but reversed by the Income Tax Tribunal. The Tribunal's decision was based on the belief that no concealment occurred. However, the appellant argued that the concealment was evident from the revised return submitted by the assessee, indicating an attempt to cover up the undisclosed deposit. The Tribunal's decision was challenged on the grounds that concealment of income was apparent, justifying the penalty under Section 271(1)(C).

Issue 2:
The assessee vehemently opposed the initiation of penalty proceedings under Section 271(1)(C), claiming it was without jurisdiction. The appellant argued that the Assessing Officer's final assessment order dated 24.03.1992 did not record any finding of concealment of income. The order accepted all explanations provided by the assessee and did not mention any concealment regarding the deposit in the Bank of Tokyo. The appellant contended that the Assessing Officer consciously refrained from initiating penalty proceedings, as evidenced by the assessment order. The appellant further argued that the mere addition of income, based on the revised return, did not warrant penalty proceedings unless the revised return was rejected for attempting to cover up concealed income. The appellant emphasized that the Assessing Officer did not express any intention to initiate penalty proceedings nor ordered such initiation, rendering the entire penalty proceeding without jurisdiction.

Judgment:
Upon considering the submissions, the court analyzed the final assessment order and found no adverse findings against the assessee regarding income concealment. The court noted that the Assessing Officer did not express any intention or satisfaction regarding concealment of income in the assessment order. The court highlighted that the acceptance of the revised return, showing a profit of 27.5%, including the undisclosed deposit, indicated no concealment. Consequently, the court dismissed the appeal, holding that the initiation of penalty proceedings under Section 271(1)(C) was not justified, as it was a question of law rather than fact.