2015 (1) TMI 1163 - HC - Income Tax

Levy of penalty u/s 263 for failure to deposit advance tax - incorrect estimation of advance tax - Held that - In the case on hand, there is no material to show that that the assessee has consciously concealed certain particulars pertaining to his income or has supplied inaccurate particulars, deliberately. Further, it is the case of the Revenue that the explanation given by the assessee in connection with his income is not acceptable and it is not the case that the assessee has offered no explanation or false explanation, at all. Instead the case of the revenue is that the explanation given by the assessee cannot be accepted. Decision of the Apex Court in CIT VS. KHODAY ESWARSA & SONS (1971 (9) TMI 19 - SUPREME Court) and AMRUT TUBEWELL COMPANY VS. ASST. CIT (2015 (1) TMI 1149 - GUJARAT HIGH COURT), penalty being proceedings being penal in character, the department must establish that the receipt of the amount in dispute constitutes income of assessee. Apart from falsity of explanation given by the assessee department must have before it before levying penalty cogent material or evidence from which it could be inferred that assessee has consciously concealed particulars of his income or had deliberately furnished inaccurate particulars in respect of the same and that the disputed amount is a revenue receipt. No doubt the original assessment proceedings, for computing the tax may be a good item of evidence in the penalty proceeding s but the penalty cannot be levied solely on the basis of the reasons given in the original order of assessment question of law raised in this appeal is answered in favour of the appellant-assessee

Summary

Issues involved:
- Dismissal of appeal by Appellate Tribunal on grounds of tax limits
- Under-valuation of closing stock
- Suppressed sales to sister concern
- Introduction of undisclosed capital
- Error in disposal of appeal by Tribunal without considering merits

Dismissal of appeal by Appellate Tribunal on grounds of tax limits:
The High Court considered whether the Appellate Tribunal was justified in dismissing the appeal of the revenue due to it being below the tax limits prescribed for filing the appeal, despite the actual tax effect being more than Rs. 1 lac. The Court referred to a previous Supreme Court decision and emphasized that penalties are penal in nature, requiring the department to establish conscious concealment or furnishing of inaccurate particulars by the assessee. The Court found no evidence of deliberate concealment by the assessee in this case and noted that the revenue's argument was based on the unacceptability of the explanation provided by the assessee rather than deliberate concealment. The Court cited a previous case to support its conclusion and held that the appeal deserved to be allowed in favor of the appellant-assessee.

Under-valuation of closing stock:
The assessment revealed under-valuation of closing stock by the assessee, leading to a show cause notice being issued. The assessee failed to attend the hearing or provide written submissions, resulting in penalty proceedings under section 271(1)(C) of the Act for inaccurate income particulars. The Commissioner (Appeals) later deleted the additions made in this regard, which were further dismissed by the Appellate Tribunal based on tax limits. The High Court emphasized the need for concrete evidence of deliberate concealment, which was lacking in this case, leading to the allowance of the appeal.

Suppressed sales to sister concern:
Another issue involved suppressed sales made by the assessee to a sister concern, resulting in a loss. The assessee did not respond to the show cause notice or provide explanations, leading to penalty proceedings under section 271(1)(C) for inaccurate income particulars. The Commissioner (Appeals) deleted these additions, but the Appellate Tribunal dismissed the appeal based on tax limits. The High Court reiterated the requirement for evidence of conscious concealment, which was absent in this case, ultimately leading to the allowance of the appeal.

Introduction of undisclosed capital:
The assessment highlighted the introduction of undisclosed capital by the assessee, which was treated as income from an undisclosed source. The assessee failed to provide a satisfactory explanation, resulting in penalty proceedings under section 271(1)(C) for income concealment. The Commissioner (Appeals) upheld these additions, but the Appellate Tribunal dismissed the appeal based on tax limits. The High Court stressed the need for concrete evidence of deliberate concealment, which was not established, leading to the allowance of the appeal.

Error in disposal of appeal by Tribunal without considering merits:
The appellant contended that the Tribunal erred in disposing of the appeal without delving into the merits of the case, citing the tax limits at the time of disposal. The High Court referred to relevant legal precedents and held that the Tribunal's decision was not justified as there was no evidence of deliberate concealment by the assessee. The Court emphasized the importance of concrete evidence in penalty proceedings and concluded that the appeal should be allowed in favor of the appellant-assessee.

This detailed analysis of the judgment covers the issues involved comprehensively, highlighting the key legal aspects and conclusions reached by the High Court.