2013 (12) TMI 63 - AT - Income Tax

Concealment of Income - Penalty u/s 271(1)(c) - While filing return of income for the assessment year under consideration, the assessee has not disclosed the correct value of closing stock and it has resulted into escapement of income which was liable to tax to the extent of non-inclusion of re-purchase price of the five flats - Held that - The assessee filed return for assessment years 2005-06 and 2006-07, the years in which the said five flats were sold and the assessee computed profit on sale of those flats - Penalty under the said provision is civil liability - Willful concealment is not an essential ingredient for attracting civil liability - The assessee has not furnished the accurate, or correct particulars of his income particularly when the assessee debited the expenditure on account of purchase of the flats and when the said flats had not been sold at the end of accounting year relevant to the assessment year, the cost of flats was required to be included as part of the closing stock - The ld. CIT(A) was correct in his view that the assessee cannot claim that the same was omitted due to bonafide mistake considering the fact that the assessee had debited the expenditure and the accounts of the assessee are audited by Chartered Accountants - Simultaneous entry has to be made in the books to give corresponding effect in the closing stock to prepare a true and correct balance sheet. On account of whose mistake, the amounts claimed as deductions in this case were not added, while computing the income of the assessee-company. - The assessee is a company which must be having professional assistance in computation of its income, and its accounts are compulsorily subjected to audit - The account of the assessee of not including the re-purchase value of the flats in question in the closing stock is not only incorrect in law but the explanation offered by the assessee is not escaped by Explanation (1) to section 271(1)(c ) of the Act - Decided against assessee.

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) for furnishing inaccurate particulars of income/concealment of income in respect of valuation of closing stock.

Detailed Analysis:

1. Background and Reassessment:
The assessee, engaged in property development, filed its return for the assessment year 2004-05, which was initially assessed under Section 143(3) of the Income Tax Act, 1961. The assessment was later reopened under Section 147 due to the detection of income escaping assessment. The Assessing Officer (AO) added Rs. 34,00,000 to the closing stock for five re-purchased flats that remained unsold, which the assessee had failed to include in the closing stock valuation.

2. Penalty Proceedings:
The AO initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income. The assessee contended that the omission was not deliberate but a genuine mistake, as the re-purchased flats were shown at cost price instead of cost plus re-purchase price. The assessee argued that the profits from the sale of these flats in subsequent years were correctly offered for tax.

3. AO's Findings:
The AO rejected the assessee's explanation, stating that the non-inclusion of the re-purchase price in the closing stock led to undervaluation and suppression of profit. This act resulted in the filing of inaccurate particulars of income, leading to a penalty of Rs. 11,22,000, which is 100% of the tax on the concealed income of Rs. 34,00,000.

4. CIT(A)'s Decision:
The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, emphasizing that the assessee admitted to the non-inclusion only after detection by the AO. The CIT(A) cited the Supreme Court's decision in Reliance Petro Products Pvt. Ltd. and the Delhi High Court's decision in Zoom Communication Ltd., concluding that the assessee furnished inaccurate particulars of income, leading to concealment of income.

5. Tribunal's Analysis:
The Tribunal noted that the assessee's failure to include the re-purchase price in the closing stock resulted in escapement of income. Despite the assessee's claim of a genuine mistake, the Tribunal emphasized that the accounts were audited, and the omission was not detected until the reassessment proceedings. The Tribunal referenced the Supreme Court's ruling in Dharmendra Processors, which held that willful concealment is not necessary for imposing a civil penalty under Section 271(1)(c).

6. Tribunal's Conclusion:
The Tribunal upheld the CIT(A)'s order, affirming that the assessee furnished inaccurate particulars of income. The explanation offered by the assessee was not considered bona fide, and the penalty of Rs. 11,22,000 was confirmed.

Final Judgment:
The appeal of the assessee was dismissed, and the penalty levied under Section 271(1)(c) was upheld. The Tribunal pronounced the order in the open court on November 20, 2013.