2015 (1) TMI 1149 - HC - Income Tax

Penalty under Section 271(1)(c) - addition of the low G.P. and cash credit as income of the assessee - Held that - The CIT(A) upheld the penalty levied by AO on the ground that the explanation offered by the assessee, herein, in respect of low G.P. And cash credit was either false or the assessee was not able to substantiate the same by producing convincing evidence in support, thereof. Having gone through the record, we find that it is neither the case of the respondent-revenue nor is there any material to show that there was any willful concealment or furnishing of inaccurate or incorrect details of income by the appellantassessee. In other words, there being no conscious concealment of income, the AO could not have imposed penalty under Section 271(1)(c) of the Act.- Decided in favour of the appellant-assessee Penalty under Section 273(2)(a) - Held that - penalty imposed by the AO under this section on the ground that the difference between the earned income and the assessed income of the assessee was more and that the assessee, himself, had declared income of ₹ 75,000/- by filing revised return. The Tribunal, further, observed that the CIT(A) had found that the assessee was not able to prove the source of cash credit, and therefore, CIT(A) upheld the penalty levied by the AO, which is confirmed by the Tribunal. However, while doing so, here again, the Tribunal failed to appreciate the fact that the assessee had not furnished any details pertaining to advance tax which was untrue. On the contrary, the additions were of such nature that the assessee could not have foreseen. We are, therefore, of the opinion that the order of the Tribunal cannot be sustained and deserves to be quashed and set aside. - Decided in favour of the appellant-assessee

Summary

Issues:
Challenge to ITAT order on penalty imposition under Sections 271(1)(c) and 273(2)(a) for assessment year 1986-87.

Detailed Analysis:

1. Background: The appellant-assessee, engaged in tubewell boring, filed its income return for 1986-87. The AO imposed penalties under Sections 271(1)(c) and 273(2)(a) for alleged income concealment.

2. Question of Law: Two key questions framed were the Tribunal's interpretation of Section 273(2)(a) and the justification for penalty under Section 271(1)(c) post-deletion of additions.

3. Appellant's Argument: Appellant's counsel argued against willful concealment, citing precedents like "NATIONAL TEXTILES VS. COMMISSIONER OF INCOME-TAX". They emphasized the need for proof of concealment.

4. Precedents: Precedents like "COMMISSIONER OF INCOME TAX VS. JALARAM OIL MILLS" and "COMMISSIONER OF INCOME-TAX II VS. DHIRAJ R. RUNGTA" were cited to challenge penalty imposition.

5. Respondent's Defense: Respondent's counsel supported CIT(A) and ITAT orders, alleging non-disclosure of facts by the assessee.

6. Legal Analysis: Sections 271(1)(c) and 273(2)(a) empower penalties for concealment or false particulars. The AO must justify penalties with evidence of willful concealment.

7. Tribunal's Decision: The Tribunal had confirmed penalties based on unproven cash credit sources and discrepancies in declared income.

8. Court's Ruling: The Court found no willful concealment by the assessee, quashing the penalties imposed under Sections 271(1)(c) and 273(2)(a).

9. Conclusion: The Tribunal's order was set aside, and both appeals were allowed in favor of the appellant-assessee, with no costs awarded.

This analysis highlights the legal battle over penalty imposition for alleged income concealment, emphasizing the need for concrete evidence to justify penalties under relevant sections of the Income Tax Act.