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2013 (3) TMI 264 - HC - Income TaxPenalty being 300% by invoking Section 271(1)(c) - as per AO assessee failed to furnish complete details from bank statement - ITAT deleted the levy - Held that - On going through the materials placed before this Court, it is seen that the AO has subsequently found that the said deposit was made for the period commencing from 01.04.2004 to 29.03.2005. Therefore, when the AO himself has found that the said deposit was not made on a single day, it cannot be said that the assessee had failed to furnish complete particulars. The Tribunal has categorically found that in the return, the assessee had shown the income on estimate basis at Rs.1,99,440/- and such estimation of income was enhanced by the Assessing Officer and consequently, imposed penalty. Therefore, from the above facts it is clear that levy of penalty was based on the estimation of income. There cannot be any imposition of penalty based on estimation of income. As decided in Commissioner of Income Tax v. Reliance Petroproducts (P) Ltd. 2010 (3) TMI 80 - SUPREME COURT) in order to bring the case under Section 271(1)(c) there has to be concealment of particulars of the income of the assessee and the assessee must have furnished inaccurate particulars of his income. Here, it is the admitted case that the assessee filed revised profit and loss account statement showing the net profit of Rs.3,92,649/- being 5% on Rs.78,52,980/- and the same having been done before the assessment was completed, thus we fail to understand as to how the Revenue is justified in imposing penalty under Section 271(1)(c) - appeal filed by the Revenue dismissed - against the Revenue.
Issues Involved:
1. Whether the Tribunal was right in cancelling the penalty imposed under Section 271(1)(c) of the Income Tax Act. 2. Whether the penalty could be imposed based on estimation of income. 3. Whether the facts constituted concealment of income or furnishing of inaccurate particulars. Detailed Analysis: 1. Whether the Tribunal was right in cancelling the penalty imposed under Section 271(1)(c) of the Income Tax Act: The Revenue appealed against the Tribunal's decision to cancel the penalty imposed under Section 271(1)(c) of the Income Tax Act for the assessment year 2005-2006. The Tribunal had found that the initial impression of the Assessing Officer (AO) regarding a single-day cash deposit of Rs.47,36,000/- was incorrect. The deposit was actually spread over twelve months. The Tribunal observed that the AO had enhanced the assessee's estimated income from Rs.3,92,649/- to Rs.6,28,240/- and imposed a penalty based on this estimation. The Tribunal concluded that this case did not warrant a penalty under Section 271(1)(c) because it was unclear whether it involved suppression of turnover or merely a lower rate of income estimation. 2. Whether the penalty could be imposed based on estimation of income: The High Court emphasized that for invoking penalty proceedings under Section 271(1)(c), there must be clear evidence of concealment of income or furnishing of inaccurate particulars. The Court noted that the AO initially believed that the assessee deposited Rs.47,36,000/- on a single day, but later found the deposits were spread over a year. The Court held that since the AO's final assessment was based on an estimation of income, imposing a penalty on this basis was not justified. The Court cited the Supreme Court's decision in Commissioner of Income Tax v. Reliance Petroproducts (P) Ltd., which stated that making an incorrect claim in law does not amount to furnishing inaccurate particulars. 3. Whether the facts constituted concealment of income or furnishing of inaccurate particulars: The High Court reiterated that for a penalty under Section 271(1)(c), there must be clear evidence of either concealment of income or furnishing inaccurate particulars. The Court found that the assessee had filed a revised Profit and Loss Account statement before the assessment was completed, showing a net profit of Rs.3,92,649/-. The Court noted that the AO had enhanced this estimation and imposed a penalty without clear evidence of concealment or inaccurate particulars. The Court referenced the Supreme Court's decision in Dilip N. Shroff v. CIT, which clarified that mens rea (intent to deceive) is not required for civil penalties but emphasized that inaccurate particulars must be clearly established. Conclusion: The High Court upheld the Tribunal's decision to cancel the penalty, concluding that the Revenue had not provided sufficient evidence of concealment or inaccurate particulars. The Court dismissed the Revenue's appeal, affirming that penalties cannot be imposed based solely on income estimation and must be supported by clear evidence of concealment or inaccuracy. The substantial question of law was answered against the Revenue, and the appeal was dismissed with no costs.
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