2016 (2) TMI 292 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance made on account of expenditure towards payments made to Globextech India (P) Ltd. by the assessee on the basis that due to search and seizure operation conducted at the premises of S.K. Gupta Group of Companies - Held that - Under the circumstances, it cannot be held beyond doubt that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee towards the additions in question to attract the penal provisions under sec. 271(1)(c) of the Act as the fulfillment of the above condition is sine quo non. Of course, in a penal provisions, advantage of benefit of doubt will go in favour of assessee. We thus while setting aside orders of the authorities below direct the Assessing Officer to delete the penalties in question in the assessment year 2003-04 and ₹ 15,38,030 in assessment year 2004-05 levied under sec. 271(1)(c) of the Act. - Decided in favour of assessee

Summary

Issues Involved:
Validity of penalty under sec. 271(1)(c) of the Income-tax Act, 1961 for disallowed expenditure to a company.

Detailed Analysis:

Issue 1: Validity of Penalty under sec. 271(1)(c)
The case involved appeals challenging penalties imposed under sec. 271(1)(c) of the Income-tax Act, 1961 for disallowed expenditure to a company. The Assessing Officer added the amounts paid to the company as income, leading to the imposition of penalties based on alleged concealment of income or furnishing inaccurate particulars. The assessee claimed the deduction for expenses but later offered the expenditure for disallowance due to lack of supporting evidence, which was accepted by the Assessing Officer. The penalty was upheld by the CIT(Appeals), prompting the appeals.

Issue 1 Analysis:
The key argument was whether the penalty was justified given the circumstances. The assessee contended that the penalty was unwarranted as the disallowance was voluntarily made due to the unavailability of relevant evidence, and the penalty proceedings should be separate from the assessment proceedings. The authorities argued that the surrender of the payment indicated concealment of income. The AR cited various decisions to support the contention that the penalty should not be imposed solely based on inadmissible claims if particulars were disclosed. The AR also referred to a decision emphasizing that accepting an assessment to avoid litigation does not imply concealment of income.

Judgment:
After considering the arguments and cited decisions, the tribunal held that the penalty under sec. 271(1)(c) should only be imposed when there is clear evidence of concealment or furnishing inaccurate particulars. In this case, the surrender of the payment due to lack of evidence did not conclusively prove concealment. The tribunal noted that both parties presented plausible explanations, and the doubt should favor the assessee in penal provisions. Consequently, the tribunal set aside the penalties imposed for the respective assessment years, directing the Assessing Officer to delete them.

Conclusion:
The appeals challenging the penalties were allowed, emphasizing the importance of clear evidence of concealment to invoke penal provisions under sec. 271(1)(c) of the Income-tax Act, 1961. The tribunal highlighted the need for a definitive demonstration of concealment or furnishing inaccurate particulars to levy penalties successfully.