2016 (1) TMI 776 - AT - Income Tax

Penalty u/s. 271(1) (c) - Held that - A case for levy of penalty for concealment of income has to be evaluated in terms of provisions of Explanation. 1 to Section. 271(1)(c), as per which if in relation to any addition in the assessment, the assessee offers no explanation or offers explanation which is found to be false or is not able to substitute the explanation and is also not able to prove that the explanation is bonafide, the addition made would amount to concealment of particulars of income. It is a settled legal position that penalty proceedings are different from assessment proceedings and the findings given in the assessment though it may constitute good evidence but same is not conclusive in the penalty proceedings Further, merely because Assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself will not be sufficient for the authorities either to initiate penalty proceedings or impose penalty. In the present case, we are of the view that in the absence of complete and convincing corroborative evidence, the Revenue may justify addition, but in the matter of penalty proceedings, the onus lies heavily on the Revenue to prove that the assessee had concealed its income or has filed inaccurate particulars of its income. In the present case no penalty is leviable u/s 271(1)(c) and therefore direct its deletion - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty order under section 271(1)(c) of the Act for A.Y. 2002-03.

Analysis:
1. The Assessee appealed against the penalty order of Rs. 24,17,963 imposed by the Assessing Officer (A.O.) under section 271(1)(c) of the Act for concealing income particulars or furnishing inaccurate particulars. The CIT(A) dismissed the appeal, leading to the current appeal.

2. The main contention was the disallowance of interest to ONGC, leading to the penalty. The A.O. disallowed the interest deduction of Rs. 67,73,007 as it was not provided for in the books, citing it as not allowable under the mercantile system. The penalty was confirmed by the CIT(A).

3. The Assessee argued that there was no concealment as the disallowed claim did not result in lower tax liability, and it was allowed in subsequent years. The Assessee claimed full disclosure and lack of mens rea, citing the Reliance Petro Products Pvt. Ltd. case. The Revenue supported the penalty.

4. The Tribunal noted that the Assessee provided explanations and disclosed all relevant facts, indicating no mala fide intention. The deeming provision under Explanation 1 to Section 271(1)(c) was analyzed, emphasizing the need for bona fide explanations and full disclosure.

5. It was established that the Assessee's claim was bona fide, and all material facts were disclosed. The Tribunal emphasized that the disallowance of a claim does not automatically imply concealment. The onus was on the Revenue to prove concealment, especially in penalty proceedings separate from assessments.

6. Consequently, the Tribunal found no basis for levying the penalty under section 271(1)(c) and directed its deletion, allowing the Assessee's appeal. The decision was pronounced on 30-10-2015 in an open court session.