2013 (1) TMI 988 - AT - Income Tax

Summary

Issues involved: Appeal against deletion of penalty u/s 271(1)(c) of the Income Tax Act.

Summary:
The Revenue appealed against the deletion of a penalty of Rs. 35,38,348/- imposed by the Assessing Officer u/s 271(1)(c) of the Act. The penalty was levied due to the concealment of particulars of income by the assessee, who was a Director of a company that received and repaid a loan from him during the assessment year 2005-06. The CIT(A) deleted the penalty after considering the explanations provided by the assessee and relevant legal precedents.

The assessee contended that there was no intention to conceal income, as he was misinformed by a consultant regarding the treatment of the loan as deemed dividend. The assessee promptly disclosed the loan amount as deemed dividend upon being informed by the Assessing Officer. Additionally, the assessee argued that he had paid all tax dues, including substantial interest, and that the tax laws are complex, making it difficult for even experts to fully comprehend.

The CIT(A) considered the submissions and legal precedents cited by the assessee. Citing the decision in the case of Sarabhai Chemicals India Pvt Ltd Vs CIT, the CIT(A) concluded that if the assessee believed in good faith that no income had accrued, then no penalty should be levied. The CIT(A) also referenced the Supreme Court decision in Dhilip N Shroff Vs JCIT, emphasizing that the imposition of a penalty is not automatic and must be fair and objective.

The CIT(A) further highlighted the complexity of tax laws and the need for a proper explanation in cases of ignorance of the law. Ultimately, the CIT(A) found that the assessee had not willfully concealed any income liable to tax, as the income was treated as such due to deeming provisions. Therefore, the penalty was deemed not exigible, and the penalty imposed by the Assessing Officer was deleted.

The Appellate Tribunal upheld the CIT(A)'s decision, noting that the deletion of the penalty was based on sound legal reasoning and precedents. The Tribunal found no specific error in the CIT(A)'s order and dismissed the appeal of the Revenue.

In conclusion, the penalty u/s 271(1)(c) of the Income Tax Act was deleted based on the assessee's good faith belief, proper disclosure, and the complexity of tax laws, as determined by the CIT(A) and upheld by the Appellate Tribunal.