2013 (12) TMI 1152 - HC - Income Tax

Penalty u/s. 271(1)(c) Disallowances in scrutiny assessment - Held that - Following CIT v. Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT - The assessee respondent, in its return of income, had disclosed all details and material particulars - It is a different aspect that Assessing Officer made certain additions in the scrutiny assessment. However later on, CIT (Appeals) had treated it differently by allowing and deleting certain additions - This cannot give rise to the penalty proceedings - For levying penalty u/s.271(1)(c), non bona fide conduct of the assessee should be apparent from the facts and circumstances Decided against Revenue.

Summary

Issues:
1. Whether the Appellate Tribunal was correct in deleting the penalty u/s. 271(1)(c) of the Act despite undisclosed facts in the return of income?
2. Whether the Appellate Tribunal was right in not providing reasons for agreeing with the First Appellate Authority?

Analysis:

Issue 1:
The case involved a challenge to the Tribunal's order deleting the penalty under Section 271(1)(c) of the Income Tax Act. The Revenue contended that the Appellate Tribunal erred in deleting the penalty as the correct facts were not disclosed in the assessee's income tax return. The Assessing Officer had initiated penalty proceedings after making additions and disallowances in the scrutiny assessment. However, the CIT (Appeals) later deleted certain additions and disallowances, concluding that there was no concealment or furnishing of inaccurate particulars by the assessee.

The Tribunal concurred with the CIT (Appeals) and upheld the decision, emphasizing that the penalty under Section 271(1)(c) is not automatic and requires non-bona fide conduct on the part of the assessee. The Tribunal found that the explanation provided by the assessee was not false or non-bona fide, leading to the cancellation of the penalty. The Tribunal also referred to the Supreme Court's decision in CIT v. Reliance Petroproducts Pvt. Ltd., highlighting the importance of non-bona fide conduct for levying penalties.

The High Court agreed with the findings of the lower authorities, noting that the assessee had disclosed all necessary details and material particulars in its income tax return as required by law. Despite the additions made by the Assessing Officer during scrutiny assessment, the subsequent actions of the CIT (Appeals) in allowing and deleting certain additions did not warrant penalty proceedings. The Court dismissed the Tax Appeal, stating that both the CIT (Appeals) and the Tribunal had correctly applied the law to the facts of the case.

Issue 2:
The second issue raised was whether the Appellate Tribunal was justified in not providing reasons for agreeing with the First Appellate Authority. The Tribunal, in its decision, did not explicitly state the reasons for concurring with the CIT (Appeals) on the penalty deletion. However, the High Court found that the Tribunal's detailed discussion and reference to legal principles, including the requirement of non-bona fide conduct for penalty imposition, sufficiently supported its decision to uphold the CIT (Appeals)'s order. The Court concluded that the Tribunal's decision was well-founded and did not require further consideration, leading to the dismissal of the Tax Appeal.