2013 (7) TMI 148 - HC - Income Tax

Initiation of penalty proceedings - CIT u/s 263 ordered non initiation of penalty proceedings - Held that - although in the revisional Order, he pointed out that a non initiation of penalty proceedings did not warrant any interference, but that does not mean that the hands of the Assessing Officer is tied on invoking the provisions under the Act, which, otherwise, would be applicable to the facts of the case - if the provisions of the Act on penalty are attracted, the Assessing Officer has to go by the dictates of the law rather than by the order of the Commissioner of Income Tax - Decided in favour of Revenue. Penalty u/s 271(1)(c) - Concealment of income - Held that - claim for bill discounting for both assessment years was found to be totally untrue, as there was no physical movement of goods - claim for depreciation was also found as a bogus claim - in the garb of the bona fide claim, the assessee cannot escape levy of penalty Following decision of Commissioner of Income Tax Vs. Zoom Communication P. Ltd. 2010 (5) TMI 34 - DELHI HIGH COURT and Union of India Vs. Rajasthan Spg. & Wvg. Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA .

Summary

Issues Involved:
1. Confirmation of penalty under Section 271(1)(c) for the assessment years 2002-03 and 2003-04.
2. Imposition of penalty without a finding of concealment of income.
3. Legitimacy of penalty when additional income was offered to purchase peace with the Department.
4. Assessing Officer's authority to levy penalty despite directions from the Commissioner of Income Tax not to initiate penalty proceedings.

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):
The assessee, a private limited company, faced penalties for the assessment years 2002-03 and 2003-04. The Tribunal confirmed the penalties, citing that "wilful concealment is not an essential ingredient for attracting penalty under Section 271(1)(c)." The Tribunal referenced decisions from higher courts, including the Apex Court, which held that penalty under Section 271(1)(c) is a civil liability and does not require proof of wilful concealment.

2. Imposition of Penalty without Finding of Concealment:
The assessee argued that the penalties were imposed without any finding of concealment. The Tribunal found that the assessee's claims, such as bill discounting and depreciation, were false and unsupported by evidence. The Tribunal concluded that the defects in the accounts and false claims constituted concealment, warranting the penalties.

3. Legitimacy of Penalty when Additional Income was Offered:
The assessee contended that the additional income was offered to "purchase peace with the Department," and thus, there was no concealment. The Tribunal rejected this argument, stating that the offer to add income does not preclude the applicability of penalty provisions if concealment is established. The Tribunal emphasized that the Commissioner of Income Tax's order under Section 263 did not restrict the Assessing Officer from invoking penalty provisions.

4. Assessing Officer's Authority to Levy Penalty:
The assessee claimed that the Commissioner of Income Tax had directed the Assessing Officer not to initiate penalty proceedings. However, the Tribunal clarified that the Commissioner's order merely stated that non-initiation of penalty proceedings did not need interference. This did not bind the Assessing Officer from applying penalty provisions if the facts warranted it. The Tribunal upheld the penalties, affirming that the Assessing Officer acted within his authority.

Conclusion:
The Tribunal confirmed the penalties under Section 271(1)(c) for both assessment years, rejecting the assessee's arguments. The Tribunal held that the false claims and unreliable accounts justified the penalties. The Tribunal also clarified that the Commissioner's order under Section 263 did not restrict the Assessing Officer's authority to levy penalties. The Tribunal's decision was based on established legal precedents and the specific facts of the case.