2015 (9) TMI 1121 - HC - Income Tax

Penalty under Section 271(1)(c) - ITAT deleted penalty - Held that - Our answer to the question of law raised in this appeal would be that when the Commissioner of Income Tax (Appeals) is satisfied, on the basis of clear and cogent reasonings given in his order, not to levy penalty and when the Tribunal finds such satisfaction on the part of the Commissioner of Income Tax (Appeals) to have been correctly arrived at, the orders do not suffer from any error of law. Therefore, we hold that the Commissioner of Income Tax (Appeals) and the Tribunal were right in ordering deletion of penalty in respect of one item of addition, on the ground that the assessee s explanation was not only bona fide but also substantiated in terms of Explanation (1)(B) of Section 271(1)(iii) of the Act. Hence, the appeal is dismissed. - Decided in favour of assessee.

Summary

Issues:
- Challenge to order passed by Income Tax Appellate Tribunal
- Assessment and reassessment of income tax
- Appeal against additions made in reassessment
- Penalty levied under Section 271(1)(c)
- Appeal against penalty to Commissioner of Income Tax (Appeals)
- Reduction and deletion of penalty by Commissioner of Income Tax (Appeals)
- Appeals to Income Tax Appellate Tribunal against penalty
- Appeal to High Court under Section 260-A

Analysis:
- The appeal by the Revenue challenges a common order passed by the Income Tax Appellate Tribunal, Madras, regarding an appeal and a cross-appeal. The respondent filed its income tax return for the Assessment year 1998-99, with certain additions made during reassessment.
- The Commissioner of Income Tax (Appeals) confirmed certain additions made in reassessment, leading to further appeals by both the Revenue and the assessee to the Income Tax Appellate Tribunal. The Tribunal dismissed the appeal of the assessee, resulting in the levying of a penalty under Section 271(1)(c) by the Assessing Officer on confirmed issues.
- The assessee appealed to the Commissioner of Income Tax (Appeals), who partially allowed the appeal, leading to further appeals by both parties to the Tribunal. The Tribunal dismissed both appeals, prompting the Revenue to file an appeal in the High Court under Section 260-A.
- The main issue before the High Court was whether the deletion of penalty in its entirety by the Commissioner of Income Tax (Appeals) and the Tribunal was justified under Section 271(1)(c). The court considered the explanation offered by the assessee and relevant legal precedents cited by the Revenue's counsel.
- The court analyzed the provisions of Section 271(1)(c) and Explanation (1) to determine the parameters for levying a penalty for concealment of income or furnishing inaccurate particulars. It emphasized the burden on the assessee to prove that the case does not fall under the category of concealment of income as per the explanation.
- The court highlighted the discretionary power conferred upon the Assessing Officer and Commissioner of Income Tax (Appeals) under Section 271(1) and the need for proper exercise of such discretion guided by the parameters in Explanation (1).
- The High Court upheld the deletion of the penalty in its entirety by the Commissioner of Income Tax (Appeals) based on cogent reasons provided in the order. It found the reasoning valid both factually and legally, and the Tribunal also affirmed the decision. The court concluded that the orders did not suffer from any error of law and held that the deletion of penalty was justified based on the bona fide and substantiated explanation provided by the assessee.

This detailed analysis covers the legal judgment comprehensively, addressing each issue involved and the court's reasoning behind the decision.