2014 (1) TMI 140 - HC - Income Tax

Penalty u/s 271(1)(c) - Held that - The vast difference between voluntary disclosed income and the income arrived by the Assessing Officer in the reassessment proceedings clearly indicates, there is concealment of income without even filing of the returns by the appellant-assessee in response to Section 148 notice. Mere reference to Explanation 3 to Section 271 would not imply that reassessment proceedings which led to penalty proceedings are based on deemed concealment of income. There was no occasion for the authorities to invoke this provision in the present situation. Quantum of penalty imposed by the Assessing Officer was substantially reduced by the CIT (Appeals) which came to be confirmed by the Tribunal - Decided against assessee.

Issues Involved:
1. Justification of penalty imposed under Section 271(1)(c) for concealment of income/furnishing inaccurate particulars.
2. Whether the penalty order was barred by limitation under Section 275.
3. Appropriateness of relying on Explanation-3 to Section 271(1)(c) post-amendment effective from 01.04.2003.

Issue-wise Detailed Analysis:

1. Justification of Penalty Imposed under Section 271(1)(c):
The appellant-assessee was involved in running a poultry farm and piggery, supplying chicken to hotels and shops. For the relevant assessment years, the appellant filed voluntary returns under Section 139, which were later reassessed due to suspected income concealment. The reassessment revealed a significant discrepancy between the declared income and the actual income, leading to the imposition of penalties under Section 271(1)(c). The Assessing Officer initially imposed a 150% penalty, which was reduced to 100% by the First Appellate Authority and confirmed by the Tribunal. The court found that the appellant failed to maintain mandatory books of accounts and provided no explanation for discrepancies in bank accounts and bills, justifying the penalty for concealment of income.

2. Limitation under Section 275:
The appellant argued that the penalty order was barred by limitation as per Section 275. The court examined the dates of penalty notices and found them to be within the permissible period. For assessment years 1995-96 to 1997-98, the penalty notice was issued on 28.03.2002, and the quantum appeal was decided on 27.09.2007, within the financial year ending 31.03.2008. Similarly, for other years, the notices were timely. Therefore, the court concluded that the penalty proceedings were not barred by limitation.

3. Reliance on Explanation-3 to Section 271(1)(c):
The appellant contended that the Tribunal erred in relying on Explanation-3 to Section 271(1)(c), which was amended effective from 01.04.2003. However, the court noted that the penalty proceedings were based on the main provision of Section 271(1)(c) and not on Explanation-3. The facts revealed that the appellant did not file returns in response to Section 148 notices, making the question of filing beyond the prescribed period irrelevant. The court emphasized that the significant difference between declared and reassessed income indicated concealment, justifying the penalty under the main section. The reference to Explanation-3 by the Tribunal was deemed incidental and not applicable to the case facts.

Conclusion:
The court upheld the penalty imposed, finding no merit in the appellant's arguments regarding limitation and the applicability of Explanation-3. The reduction of penalty to 100% by the First Appellate Authority was deemed appropriate. Consequently, all questions of law were answered against the appellant, and the appeals were dismissed.

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