2014 (12) TMI 571 - HC - Income Tax

Imposition of penalty u/s 271(1)(c) Inaccurate particulars furnished or not Held that - The penalty has been imposed on account of disallowance of royalty payment - The Tribunal, relied upon MAK Data P. Ltd. Versus Commissioner of Income Tax-II 2013 (11) TMI 14 - SUPREME COURT - where the assessee offered to surrender certain amount received as share application money as its income from undisclosed source in the assessment proceedings pursuant to survey operations and when penalty was sought to be imposed under Section 271(1)(c) of the Act - assessee had claimed the deduction for the royalty payment for the second time, when it was in fact claimed in the preceding AY and allowed - when the TDS certificates in respect of the royalty paid to M/s Bayer AG Germany was asked to be furnished, after verifying the details, it was noticed that some of the TDS certificates pertained to the earlier year and part of the royalty payment attributed to these certificates had already been claimed and allowed as deduction to the assessee in the earlier years - the plea taken by the assessee is only cursory and does not give any acceptable explanation for the wrong computation, as the error was detected by the original authority only during the proceedings u/s 143(3) and she has also recorded a categorical finding that the assessee suppressed the income by making a wrong claim of royalty payment, which actually pertained to earlier assessment years, which was claimed and allowed and therefore thought it fit to levy penalty u/s 271(1)(c) of the Act the decisions relied upon by assessee cannot be followed as they are distinguishable and the department was justified in imposing the penalty u/s 271(1)(c) of the Act, as the explanation offered by the assessee is no explanation at all in the eye of law thus, as such no substantial question of law arises for consideration Decided against assessee

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.
2. Whether the claim of royalty payment was made inadvertently or with mala fide intention.
3. Applicability of Supreme Court decisions on similar cases.
4. Justification of penalty based on the facts and legal provisions.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The primary issue in this appeal is the imposition of a penalty under Section 271(1)(c) of the Income Tax Act on the appellant-assessee for furnishing inaccurate particulars of income. The assessee, involved in the leather chemical business, filed its return for the assessment year 2002-03 admitting a loss of Rs. 1,47,72,551/-. During scrutiny under Section 143(3), it was found that the assessee had claimed a deduction for royalty payment twice, leading to an addition of Rs. 1,12,29,927/- to the total income. The original authority initiated penalty proceedings under Section 271(1)(c) for the false claim.

2. Inadvertent Claim vs. Mala Fide Intention:
The assessee argued that the royalty payment claim was made inadvertently and voluntarily corrected during the assessment proceedings. However, the original authority and the Tribunal found that the error was detected during scrutiny, and the assessee admitted the mistake only after being prompted by the Assessing Officer. The Tribunal concluded that the possibility of such an inadvertent mistake was remote, as the claim was made twice for the same royalty payment to M/s Bayer AG Germany, and proper care was not taken to furnish accurate particulars of income.

3. Applicability of Supreme Court Decisions:
The Tribunal relied on the Supreme Court's decision in MAK Data (P) Ltd v. CIT (2013) 358 ITR 593 (SC), which held that voluntary disclosure does not absolve the assessee from penalty if the disclosure is made after detection by the Assessing Officer. The Tribunal also referred to the Supreme Court's decision in CIT vs Gold Coin Health Food Pvt Ltd (304 ITR 308), which clarified that penalty is leviable even if the addition of concealed income reduces the returned loss. The assessee's reliance on the Supreme Court's decision in Price Waterhouse Coopers Pvt Ltd. v. Commissioner of Income Tax (2012) 348 ITR 306 (SC) was distinguished, as that case involved a bona fide and inadvertent error, unlike the present case.

4. Justification of Penalty:
The Tribunal and the High Court found that the assessee's explanation for the wrong claim was not credible, as the error was detected during scrutiny, and no cogent evidence was provided to support the claim of inadvertence. The High Court emphasized that the burden of proof lies on the assessee to show that there was no concealment or furnishing of inaccurate particulars, which was not discharged satisfactorily in this case. The High Court upheld the Tribunal's decision, stating that the department was justified in imposing the penalty under Section 271(1)(c) as the explanation offered by the assessee was inadequate.

Conclusion:
The High Court dismissed the appeal, affirming the Tribunal's decision to impose a penalty of Rs. 40,09,083/- for furnishing inaccurate particulars of income. The court found no substantial question of law arising for consideration, as the facts of the case were thoroughly examined, and the penalty was justified based on the legal provisions and judicial precedents.

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