2014 (7) TMI 1056 - AT - Income Tax

Penalty u/s 271(1)(c) Inaccurate particulars furnished Held that - So far as it relates to levy of concealment penalty on a sum of ₹ 11,75,175/-, no concealment penalty is leviable - CIT(A) has held that since there was no taxable income or tax assessed for payment during a particular year, the question of evasion and penalty does not arise and provisions of section 271(1)(c) of the Act will be attracted in the case where assessee has positive income only and not loss - the question of levy or otherwise of the concealment penalty on the addition is restored back to the file of CIT(A) with the same directions as have been given by the Tribunal in the case of assessee for AY 1999-2000 Decided in favour of Assessee.

Issues:
1. Reduction of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Direction to levy penalty on the positive income only.
3. Application of explanation 4 to section 271(1)(c) for penalty calculation.
4. Disallowance of lease rent and interest on loans.
5. Restoration of penalty decision based on previous Tribunal order.

Analysis:
1. The judgment involves cross-appeals against the order passed by the Ld. CIT(A) for the assessment year 2000-01. The Revenue's grounds of appeal primarily challenge the reduction of the penalty levied under section 271(1)(c) from Rs. 50,00,000 to Rs. 5,26,632. The CIT(A) was criticized for allowing substantial relief to the assessee. The appellant sought restoration of the Assessing Officer's order. On the other hand, the assessee's grounds of appeal contested the penalty charged by the JCIT under section 271(1)(c) for allegedly furnishing inaccurate particulars of income related to lease rent claims.

2. The second issue pertains to the direction given by the CIT(A) to levy the penalty under section 271(1)(c) on the positive income only, rather than the entire evaded income. This decision was challenged by the Revenue, arguing that the penalty should be based on the entire evaded income. The CIT(A) relied on the decision in the case of CIT vs. Prithipal Singh while making this determination.

3. The application of explanation 4 to section 271(1)(c) for penalty calculation was a crucial aspect of the judgment. The CIT(A) directed the penalty to be levied only on the difference between the tax sought to be evaded on the returned income and the finally assessed income. This approach was contested by the Revenue, emphasizing the concealed income of Rs. 1,15,92,043 should have been considered for penalty calculation. The CIT(A) justified the penalty calculation based on specific legal precedents and decisions.

4. The judgment also addressed the disallowance of lease rent and interest on loans to group companies. The deletion of the addition related to interest on loans in quantum proceedings by the Tribunal influenced the decision on the concealment penalty. The Tribunal's order highlighted the lack of documentary evidence due to unforeseen circumstances, leading to the deletion of the disallowance. Consequently, no concealment penalty was deemed applicable in this regard.

5. Lastly, the restoration of the penalty decision based on a previous Tribunal order for the assessment year 1999-2000 was a significant part of the judgment. The issue of levy of concealment penalty on specific additions was restored back to the file of the Ld. CIT(A) for further review, aligning with the directions given in the previous Tribunal order. This decision was made in consideration of the retrospective effect of an amendment to explanation 4 to section 271(1)(c) as clarified by the Hon'ble Supreme Court. The appeals were considered allowed for statistical purposes based on the aforementioned considerations.

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