2012 (11) TMI 496 - HC - Income Tax

Penalty u/s 271 - suppression of turnover - Held that - The suppression of turnover is different from the suppression of income. If there is suppression of turn-over, there is liability to pay excise duty. Merely because the excise duty is paid, there is no presumption that it leads to taxable income in the hands of the assessee. The tax under the Income Tax Act is payable for the income in excess of the limit prescribed under the Act. It is in this context, after the Settlement Commissioner under the Excise Act resolved the dispute between the parties, which waived the penalty, then whether he had income or not, he was forced to file revised returns and then pay tax as well as the interest for delayed payment of tax. All this was done prior to issue of notice u/s 148 or may be after the survey was conducted by the Income Tax Department. That by itself would not lead to a conclusion that there was concealment of income, as rightly held by the Tribunal - no substantial question of law which arise for consideration - in favour of assessee.

Summary

Issues:
- Concealment of income and suppression of sales
- Revised returns filed by the assessee
- Imposition of penalty by the assessing officer
- Appeal to the Commissioner of Income Tax (Appeals) and Tribunal

Concealment of income and suppression of sales:
The case involved a manufacturer of safety head-gear who was detected with suppression of sales during a survey conducted by the Director General of Central Excise. The assessee filed revised returns declaring additional income due to the initial capital and suppression of sales for different assessment years. The assessing officer issued a notice under Section 148 of the Income Tax Act, alleging concealment of income through suppression. The Revenue contended that the revised returns were not voluntary and bona fide, indicating an intention to evade tax.

Revised returns filed by the assessee:
The assessee argued that the revised returns were filed after the completion of proceedings under the Central Excise Act, accompanied by the payment of taxes and interest. Despite these actions, the additions made by the assessing officer were sustained. The Tribunal, however, opined that since the returns were filed before the notice was issued and taxes were paid, there was no suppression of income, leading to the setting aside of the penalty imposition.

Imposition of penalty by the assessing officer:
The assessing officer finalized the assessment under Section 143(3) read with Section 147 of the Act, making additions to the income and calling for penalty proceedings. The Revenue contended that the revised returns were not voluntary and demonstrated an intention to avoid tax, citing a judgment from the Gujarat High Court. The Tribunal disagreed, emphasizing that the filing of revised returns before the notice was not indicative of concealment of income.

Appeal to the Commissioner of Income Tax (Appeals) and Tribunal:
The assessee appealed to the Commissioner of Income Tax (Appeals) and then to the Tribunal, challenging the imposition of penalty. The Tribunal, after considering the facts and the law, concluded that the revised returns were not filed with an intent to conceal income, especially since taxes were paid before the notice was issued. The Tribunal set aside the penalty imposition, leading to the Revenue's appeal against this decision. Ultimately, the High Court dismissed the appeal, finding no substantial question of law in the case.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the filing of revised returns before the notice under Section 148 of the Act did not indicate concealment of income. The Court highlighted the distinction between suppression of turnover and taxable income, noting that payment of excise duty did not automatically imply taxable income under the Income Tax Act. The judgment focused on the voluntary nature of the revised returns and the absence of intent to evade tax, leading to the dismissal of the Revenue's appeal.