2018 (9) TMI 2061 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - Contract receipt for the year shown in the P L account as different from ITS detail and Form 26AS - CIT(A) deleted the penalty/s. 271(1)(c) observing that the AO had not given any credit for tax deducted at source while calculating tax sought to be evaded and assessee had accepted the mistake, offered income to be taxed at a much higher rate than actually earned and did not file any appeal - HELD THAT - Admittedly, in this case, the assessee has conceded the turnover to the tune of ₹ 1,40,49,048/- which led to the estimation of income by the Assessing Officer and consequent levy of penalty. Therefore, quantification of suppressed turnover is not based on mere estimation. It is only based on Form 26AS related to the assessee. Consequent to the quantification of the suppressed turnover, profit on it was estimated. The assessee has not been able to substantiate the reason for not disclosing the correct turnover to the Department - there was actual suppression of turnover by the assessee which resulted in concealment of income of the assessee - estimation of income was not challenged by the assessee before the higher forum which means that the assessee has admitted concealment of income. Hence, levy of penalty under section 271(1)(c) of the Act is justified. However, in our opinion, levy of penalty at 200% of the tax sought to be evaded is not proper and not reasonable. It is very excessive. Accordingly, we modify the penalty order of the Assessing Officer and sustain the penalty at 100% of the tax sought to be evaded which works out to ₹ 10,25,850/-. This ground of appeal of the Revenue is partly allowed.

Summary

Issues:
1. Deletion of penalty u/s. 271(1)(c) of the Act.

Analysis:
The appeal filed by the Revenue challenged the order of the CIT(A)-II, Kochi regarding the deletion of penalty under section 271(1)(c) of the Income Tax Act for the assessment year 2010-11. The facts revealed that the assessee, a firm engaged in advertisement contracts, had a significant discrepancy in its reported income compared to actual receipts. The Assessing Officer estimated the suppressed turnover at 12% of the gross receipts, resulting in a penalty of 200% of the tax sought to be evaded, amounting to ?20,51,700. However, the CIT(A) deleted the penalty, emphasizing that the Assessing Officer had not considered the tax deducted at source while calculating the tax sought to be evaded. The CIT(A) also noted that the assessee had admitted the mistake, offered income for taxation at a higher rate, and did not appeal the assessment. The CIT(A) found the penalty levied to be excessive and lacking proper justification, leading to the deletion of the penalty.

The Revenue contended that the assessee had not disclosed the correct contract receipts, leading to a substantial omission of income. The Revenue argued that the Explanation 1 to section 271(1)(c) applied as the assessee furnished inaccurate particulars without a satisfactory explanation. On the other hand, the assessee's representative argued that the assessment was based on an estimation, and since the assessee accepted the proposed income estimation without appeal and paid the tax, there was no concealment or inaccurate particulars. The representative relied on a Kerala High Court judgment and other precedents supporting the view that in cases of estimated income, there is no positive income concealed.

Upon review, the Tribunal found that the suppressed turnover was not merely an estimation but based on actual figures from Form 26AS. The Tribunal concluded that the assessee had indeed suppressed turnover, leading to income concealment. While upholding the penalty under section 271(1)(c), the Tribunal deemed the 200% penalty imposed by the Assessing Officer excessive and reduced it to 100% of the tax sought to be evaded, amounting to ?10,25,850. The Tribunal partially allowed the Revenue's appeal, modifying the penalty amount.

In conclusion, the Tribunal acknowledged the suppression of turnover by the assessee, leading to income concealment justifying the penalty under section 271(1)(c). However, the Tribunal deemed the initial 200% penalty excessive and reduced it to 100% of the tax sought to be evaded. The appeal filed by the Revenue was partly allowed, and the modified penalty amount was upheld.