2013 (2) TMI 181 - HC - Income Tax

Penalty u/s 271(1)(c) - extra liability in respect of sundry creditors - Held that - Tribunal has held that except reiterating its stand that the balances shown in its books of account are correct no material was placed in support of the assertion. Thus, the explanation as given has not been substantiated. No supportive evidence was furnished in support of the correctness of the balances as shown in the books of account. The Tribunal has further found that after detection has been made by the Department the surrender made by the assessee does not absolve him from the charge for which he has to be proceeded against under the provisions of Section 271(1)(c). It has further held that the confirmation of third parties in regard to the balances appearing in books of account which differ from the ones recorded in the books of the assessee is an evidence against the assessee, which he must rebut with the material available with him and not only no efforts were made to do so the assessee kept on seeking adjournments till he was cornered by the third parties to prove inaccurate particulars of income shown by him. The Tribunal has held that from mere surrender would not absolve him from the charge against as levied. Thus the aforesaid finding recorded by the Tribunal clearly shows that at no point of time the assessee offered any explanation regarding the correctness of the balances shown in the sundry creditors account and only when he was cornered and he had surrendered the amount. The decision of this Court in the case of Saran Khandsari Sugar Works (1999 (9) TMI 15 - ALLAHABAD HIGH COURT) would not be applicable as in the aforesaid case the Tribunal has held that the assessee had agreed to a higher assessment on the condition that no penalty would be imposed which was a finding of fact and further the Tribunal has held that no actual concealment was established and, therefore, the assessee was to be held to be discharged the onus under the Explanation to Section 271(1)(c). On the contrary in the present case the Tribunal has recorded findings which are against the appellant - against assessee.

Summary

Issues:
Penalty under Section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The appeal pertains to the Assessment Year 1989-90 concerning a penalty imposed under Section 271(1)(c) of the Act. The appellant, a registered partnership firm, initially declared an income of Rs. 69,170 for the year. During assessment proceedings, a significant additional liability related to sundry creditors was identified by the Assessing Officer, leading to further scrutiny. The appellant, in response, acknowledged the discrepancy and agreed to add Rs. 2,26,079.65 to their income to expedite the assessment process. Consequently, a penalty under Section 271(1)(c) was initiated, and despite the appellant's submission of explanations, a penalty of Rs.1,25,000 was imposed by the Assessing Officer, citing lack of substantiation and bona fide intentions.

The appellant, dissatisfied with the penalty, appealed to the Commissioner of Income Tax (Appeals) and subsequently to the Tribunal. The Tribunal upheld the penalty, prompting the appellant to challenge the decision before the High Court. The appellant argued that since the disputed amount was voluntarily surrendered to facilitate the assessment process and avoid prolonged proceedings, there was no deliberate concealment of income warranting a penalty under Section 271(1)(c). In contrast, the Department's counsel contended that the appellant's surrender indicated a lack of a plausible explanation for the discrepancies, justifying the penalty.

Upon careful consideration, the High Court analyzed the Tribunal's findings, noting the absence of concrete evidence or support for the appellant's assertions regarding the correctness of the balances in the accounts. The Court emphasized that mere surrender of the amount did not absolve the appellant from penalty liability, especially when confronted with discrepancies by third parties. Drawing a distinction from a precedent cited by the appellant, the Court highlighted that in the present case, the Tribunal's findings were adverse to the appellant, indicating a failure to provide a satisfactory explanation for the discrepancies.

Ultimately, the High Court concluded that the Tribunal's order was legally sound, devoid of any infirmity. The Court dismissed the appeal, affirming the Tribunal's decision to uphold the penalty under Section 271(1)(c) against the appellant.