2015 (11) TMI 1 - AT - Income Tax

Penalty under section 271(1)(c) - addition on deemed dividend under section 2(22)(e) - Held that - It is a case where the assessee failed to substantiate its stand about the perception of viewing a particular transaction. A difference in perception about a transaction, in our view, would not constitute furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act. Notably, a perusal of the assessment order passed by the Assessing Officer under section 143(3) of the Act on 5/11/2003 clearly suggests that the Assessing Officer has perceived the said transaction to be falling within the scope of the deeming provisions of section 2(22)(e) based on the particulars furnished by the assessee. It is not a case where assessee can be said to have concealed or furnished any wrong or false particulars about the transaction. Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd.(2010 (3) TMI 80 - SUPREME COURT) has held that unless there is a finding that any of the details or particulars supplied by the assessee in its return are found to be incorrect or erroneous or false, it would not invite the penalty under section 271(1)(c) of the Act merely because the claim made in the return of income has been found to be unsustainable. In the present case, factually speaking, the situation is of a varying perception of the nature of transaction which has resulted in application of section 2(22)(e) of the Act, thereby resulting in a difference between returned and the assessed income. Having regard to the entire conspectus of facts and circumstances of the case, in our view it is not a fit case for levy of penalty under section 271(1)(c) of the Act. Accordingly, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the penalty imposed under section 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 for alleged concealment of income.

Analysis:
The appellant, an individual deriving income from trading in shares, salary, and other sources, contested the penalty of Rs. 2,31,000 imposed under section 271(1)(c) of the Act due to a difference in the returned and assessed income, treated as 'deemed dividend' under section 2(22)(e) of the Act. The Assessing Officer found the appellant guilty of concealing income by filing inaccurate particulars regarding receiving Rs. 7.00 lacs from a company, leading to the penalty imposition. The appellant argued that the transaction was part of regular business dealings and not a 'loan' or 'advance' under section 2(22)(e), emphasizing no deliberate intention to conceal income. The appellant's representative cited substantial declared incomes in previous years to support the claim of no deliberate concealment. The Assessing Officer's decision was affirmed by the CIT(A), prompting the appeal.

The appellant's stance was that the transaction was a business dealing and not a 'loan' or 'advance,' thus not falling under section 2(22)(e) of the Act. The appellant failed to substantiate this claim, leading to a difference in perception with the Assessing Officer. The Tribunal noted that a difference in perception about a transaction does not constitute furnishing inaccurate particulars of income under section 271(1)(c). Referring to the Supreme Court judgment in CIT vs. Reliance Petroproducts Pvt. Ltd., it was emphasized that penalty is not leviable unless the details supplied by the assessee are found to be incorrect or false. The Tribunal found that the situation in this case was of varying perceptions regarding the nature of the transaction, leading to the application of section 2(22)(e) and a difference between returned and assessed income. Consequently, the Tribunal set aside the penalty imposed under section 271(1)(c) and directed the Assessing Officer to delete the penalty of Rs. 2,31,000.

In conclusion, the Tribunal allowed the appeal of the assessee, highlighting that the penalty under section 271(1)(c) was not justified due to the difference in perception regarding the transaction, leading to the application of section 2(22)(e) and no deliberate intention to conceal income.