2016 (1) TMI 714 - AT - Income Tax

Penalty order u/s.271(1)(c) - addition of work-in-progress, Unsecured Loan, Sundry Creditors and Disallowance of various expenses due to non production of evidence - Held that - Proceedings u/s.271(1)(c) of the Act are altogether separate proceedings in the Act and should not be over shadowed by the proceedings held before during the assessment for that year and accordingly, we hereby remit the issue back to the file of Assessing Officer with a clear direction to give proper opportunity of being heard to the assessee to examine the reply of the assessee against various disallowances made by the Assessing Officer during the assessment proceedings, supporting evidences, ledger accounts and other records, which the assessee shall submit before the Assessing Officer to examine that whether there was any concealment of income on the part of assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Levying of penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Non-submission of evidence during assessment proceedings.
3. Examination of evidence during penalty proceedings.
4. Separate nature of assessment and penalty proceedings.

Detailed Analysis:

1. Levying of Penalty under Section 271(1)(c) of the Income-tax Act, 1961:
The core issue is whether the Assessing Officer (AO) was justified in imposing a penalty of Rs. 38,94,372 under section 271(1)(c) of the Income-tax Act for the assessment year 2006-07. The penalty was based on additions made for work-in-progress, unsecured loans, sundry creditors, and various disallowed expenses amounting to Rs. 1,38,87,687 due to non-production of evidence during the assessment proceedings.

2. Non-Submission of Evidence During Assessment Proceedings:
The assessee, a Private Limited Company engaged in dyeing and printing of art silk cloth, failed to submit required details during the assessment proceedings. Despite notices under sections 143(2) and 142(1) of the Act, the assessee did not comply, leading the AO to assess the income ex parte under section 144 read with section 143(3), resulting in an assessed income of Rs. 1,49,02,450 after adding Rs. 1,44,14,687.

3. Examination of Evidence During Penalty Proceedings:
During penalty proceedings, the assessee submitted detailed replies and supporting documents, arguing that there was no concealment of income. The AO, however, did not consider these submissions, maintaining that the onus was not discharged during the assessment proceedings. The Tribunal noted that the AO should have considered the evidence provided during the penalty proceedings, which could have potentially altered the penalty decision.

4. Separate Nature of Assessment and Penalty Proceedings:
The Tribunal emphasized that assessment proceedings under section 143(3) and penalty proceedings under section 271(1)(c) are separate. The AO should evaluate penalty proceedings based on the facts and evidence available at that time, not merely rely on the assessment findings. The Tribunal cited precedents, including the Hon'ble Jurisdictional High Court's rulings in cases like National Textile vs. CIT and CIT vs. Jalaram Oil Mills, to support this view. These cases establish that penalty cannot be justified solely based on assessment additions without proving conscious concealment or furnishing of inaccurate particulars.

Conclusion and Directions:
The Tribunal remitted the issue back to the AO with directions to re-examine the evidence and supporting documents submitted by the assessee during the penalty proceedings. The AO is instructed to provide the assessee an opportunity to present its case and determine whether there was any concealment of income. The appeal was allowed for statistical purposes, emphasizing that penalty proceedings should be independently assessed based on the merits of the evidence presented.

Order Pronouncement:
The order was pronounced in open court on 4th November 2015.