2017 (2) TMI 1378 - HC - Income Tax

Levy of penalty u/s 271(1)(c) - period of limitation - whether penalty is to be levied in piecemeal as and when the individual issues of an assessment are concluded - The question is, whether in respect to six items also period of limitation would commence from the date Tribunal passed order on 19.02.2001, when it was received by CIT or will commence when, after remand, assessment order is passed by AO in respect to two items and that order attained finality and communicated to CIT. Held that - In the present case, if penalty was to be imposed in respect to 6 items which stood final after judgment and order dated 19.02.2001 passed by Tribunal received by CIT(A) on 14.03.2002, the limitation would come to an end after six months, i.e., 30.09.2002. The argument advanced otherwise by learned counsel for appellant (revenue), therefore, cannot be accepted. It is not the question of piecemeal penalty but when penalty is being imposed taking into account quantum of additions upheld or accepted, then statute providing limitation will have to be applied strictly in that respect. Questions-I and II, therefore, are answered against Revenue and in favour of Assessee. Levy of penalty - concealment of particulars - Held that - Meaning of word concealment is to hide, to keep secret. Free concealment of particulars and income would include false deduction or exemption claimed by Assessee in his Return. The word conceal involves and implicit a knowledge on the part of Assessee of his real income when furnished particulars. If an income was already in the knowledge of Department, it cannot be said to be a case of concealment. An erroneous claim and deduction which was withdrawn when error was discovered cannot be said to be concealment of income and penalty cannot be imposed. - No penalty. - Decided against the revenue.

Issues Involved:
1. Deletion of penalty under Section 271(1)(c) due to expired limitation.
2. Justification of piecemeal imposition of penalty.
3. Deletion of penalty despite substantial difference between assessed and returned income.
4. Deletion of penalty related to delayed statutory deductions under Section 43B.

Issue-wise Detailed Analysis:

Issue I: Deletion of Penalty under Section 271(1)(c) Due to Expired Limitation
The Tribunal deleted the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, on the grounds that the limitation period for imposing the penalty had expired. The Tribunal's decision was challenged by the Revenue, arguing that the limitation period should be considered from the date of the revised assessment order, not the original assessment order. The High Court upheld the Tribunal's decision, emphasizing that the limitation period should be calculated from the date when the Tribunal's order was received by the CIT, which was 14.03.2002. Since the penalty order was passed on 30.03.2005, it was beyond the six-month limitation period, making the penalty time-barred.

Issue II: Justification of Piecemeal Imposition of Penalty
The Revenue argued that penalty should be imposed piecemeal as and when individual issues of an assessment are concluded. However, the High Court rejected this argument, stating that the limitation period for imposing the penalty should be strictly applied. The Court clarified that once the Tribunal's order on the six items became final, the limitation period for imposing the penalty on those items expired on 30.09.2002. Therefore, imposing a penalty after this date was barred by limitation, and the Tribunal was justified in deleting the penalty.

Issue III: Deletion of Penalty Despite Substantial Difference Between Assessed and Returned Income
The Revenue contended that the substantial difference between the assessed income and the returned income indicated concealment of income, justifying the imposition of penalty under Section 271(1)(c). The High Court, however, emphasized that mere disallowance or non-acceptance of claims does not automatically lead to the imposition of penalty. The Court referred to the Supreme Court's judgment in CIT Vs. Reliance Petroproducts Pvt. Ltd., which held that making an incorrect claim does not amount to furnishing inaccurate particulars. The Court noted that the Assessing Officer (AO) did not provide specific findings of concealment or inaccurate particulars, and thus, the penalty was rightly deleted by the Tribunal.

Issue IV: Deletion of Penalty Related to Delayed Statutory Deductions Under Section 43B
The Tribunal deleted the penalty related to additions made on account of delayed payments of statutory deductions to the government under Section 43B. The Revenue argued that since the additions were confirmed in the quantum appeal, the penalty should be upheld. The High Court, however, reiterated that the AO must demonstrate specific concealment or inaccurate particulars for each addition. The Court found that the AO's penalty order lacked detailed reasoning on how the Assessee concealed income or furnished inaccurate particulars. Consequently, the Tribunal's decision to delete the penalty was upheld.

Conclusion:
The High Court dismissed the Revenue's appeal, affirming the Tribunal's decision to delete the penalty imposed under Section 271(1)(c). The Court emphasized the importance of adhering to the statutory limitation period for imposing penalties and the necessity for the AO to provide specific findings of concealment or inaccurate particulars to justify the imposition of penalties.

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