2015 (9) TMI 1120 - HC - Income Tax

Penalty proceedings under section 271(1)(c) - Held that - Section 271(1)(c) is attracted in a case where the Assessing Officer is satisfied that any person has concealed the particulars of his income or has furnished incorrect particulars of such income. Once the Assessing Officer has arrived at such a satisfaction, he is entitled to levy, in addition to the tax payable, by way of penalty, the amount indicated in 271 (1)(iii). In addition to this, as provided in the explanation, if the person concerned is not able to substantiate the explanation and fails to prove the bona fides of the explanation and all facts relating to the same and material to the computation of his total income, the amount added or disallowed shall be deemed to be his income. The assessee had also claimed deduction of ₹ 1,84,39,383/-. The Assessing Officer allowed only ₹ 68,02,297/-. The Commissioner (Appeals), after verification of some of the documents produced by the assessee, allowed the claim except to the extent of ₹ 34.65 lakhs. This finding also has become final. Therefore, in view of the aforesaid findings against the assessee, this is a case where clause (c) of section 271(1) providing concealment of the particulars of income or furnishing of inaccurate particulars of such income is attracted. This clearly is a case to which section 271(1)(c) is attracted and the levy of penalty cannot be interfered with. Unable to accept the case of the appellant that the Tribunal committed an illegality in restoring the order of the Assessing Officer. - Decided against assessee.

Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal.
2. Assessment of income and deductions claimed by the trust.
3. Initiation of penalty proceedings under section 271(1)(c) of the IT Act.
4. Challenge against the penalty order by the Revenue.
5. Examination of whether the Tribunal was correct in upholding the penalty order.
6. Interpretation and application of section 271(1)(c) of the IT Act.
7. Justification for the levy of penalty on the trust.

Issue 1: Appeal against the order of the Income Tax Appellate Tribunal
The appellant, a trust registered under section 12AA of the Income Tax Act, filed an appeal against the order of the Income Tax Appellate Tribunal, Cochin Bench in ITA.778/Coch/2009.

Issue 2: Assessment of income and deductions claimed by the trust
The trust's return for the year 2004-05 showed a deficit of &8377; 1,89,38,383. The Assessing Officer made additions towards short collection at the hospital and allowed only a portion of the claimed deduction on capital expenditure. The Commissioner of Income Tax (Appeals) sustained capital expenses, except for a specific amount, and upheld the addition towards short collection at the hospital.

Issue 3: Initiation of penalty proceedings under section 271(1)(c) of the IT Act
After the assessment, the Assessing Officer initiated penalty proceedings under section 271(1)(c) and levied a penalty of &8377; 16 lakhs. The Appellate Commissioner set aside the penalty order, but the Income Tax Appellate Tribunal allowed the Revenue's appeal and restored the penalty order.

Issue 4: Challenge against the penalty order by the Revenue
The order of penalty was challenged by the Revenue before the Income Tax Appellate Tribunal, which allowed the appeal and reinstated the penalty imposed by the Assessing Officer.

Issue 5: Examination of whether the Tribunal was correct in upholding the penalty order
The High Court examined whether the Tribunal was correct in upholding the penalty order passed by the Assessing Officer under section 271(1)(c) of the IT Act.

Issue 6: Interpretation and application of section 271(1)(c) of the IT Act
Section 271(1)(c) of the IT Act allows for the levy of penalty if a person has concealed income particulars or furnished inaccurate income particulars. The section provides for penalty up to three times the tax sought to be evaded due to such concealment or inaccuracy.

Issue 7: Justification for the levy of penalty on the trust
The trust failed to account for the differential amount in its collection, and the Assessing Officer found discrepancies in the claimed deductions. The trust's explanation for the discrepancies was rejected, leading to the conclusion that penalty under section 271(1)(c) was justified. The High Court upheld the penalty, citing legal precedents and the trust's failure to substantiate its explanations.

In conclusion, the High Court dismissed the appeal, upholding the penalty imposed on the trust under section 271(1)(c) of the IT Act. The court found that all the legal requirements for the imposition of the penalty were met, and the trust's explanations for the discrepancies were deemed insufficient. The judgment emphasized the importance of complying with tax laws and the consequences of failing to provide accurate income particulars.

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