2007 (6) TMI 200 - HC - Income Tax

Penalty levied on ground of concealment of income mistake in placement of decimal point while computation of income - Tribunal found that the misplacement of a decimal cannot tantamount to concealment of particulars or furnishing inaccurate particulars - On facts, the Tribunal correctly deleted the penalty levied u/s 271(1)(c) - reasons given by the Tribunal are based on valid materials and evidence so there is no infirmity in the order of the Tribunal so as to warrant interference

Summary

Issues:
1. Penalty under section 271(1)(c) - mens rea to conceal income and avoid tax.
2. Application of Supreme Court decision in Sir Shadilal Sugar and General Mills Ltd. case.
3. Deletion of penalty for inaccurate particulars and failure to submit accounts under section 36(1)(viia).

Issue 1 - Penalty under section 271(1)(c):
The case involved an appeal by the Revenue against the Income-tax Appellate Tribunal's order regarding the levy of penalty under section 271(1)(c) of the Income-tax Act, 1961. The Revenue contended that the assessee deliberately claimed excess deduction, leading to a concealment of income. The Assessing Officer found a clear concealment of income and levied a penalty. However, the Tribunal, following legal principles, concluded that the mistake made by the assessee was due to a clerical error, specifically a misplacement of decimals, and not a deliberate act of concealment. The Tribunal emphasized that the burden lies on the Department to establish concealment, and in this case, the misplacement of decimals did not amount to concealment. The Tribunal's decision to delete the penalty was upheld by the High Court, citing the absence of mala fide intention and the inadvertent nature of the error.

Issue 2 - Application of Supreme Court decision:
The Tribunal's decision to delete the penalty was based on principles outlined in the Supreme Court case of Sir Shadilal Sugar and General Mills Ltd. v. CIT, where it was established that the imposition of penalty under section 271(1)(c) is not automatic and must consider the facts of each case. The High Court concurred with the Tribunal's application of this legal precedent, emphasizing that the Assessing Officer's discretion in levying penalties should be fair and objective, and penalties should not be imposed merely to harass the assessee. The High Court found that the Tribunal's decision aligned with the principles laid down by the Supreme Court and did not warrant interference.

Issue 3 - Deletion of penalty for inaccurate particulars:
The case also involved the deletion of penalty for inaccurate particulars and failure to submit accounts under section 36(1)(viia) of the Act. The assessee had claimed a deduction that was later found to be in excess due to a clerical error. The Tribunal accepted the assessee's explanation that the error was unintentional and not a deliberate attempt to conceal income. The High Court agreed with the Tribunal's findings, noting that the misplacement of decimals did not amount to concealment or furnishing inaccurate particulars. The High Court upheld the Tribunal's decision to delete the penalty, emphasizing the absence of deliberate intent and the factual basis for the error.

In conclusion, the High Court dismissed the appeal by the Revenue, stating that no substantial questions of law arose for consideration. The Tribunal's decision to delete the penalty was found to be based on valid reasoning and evidence, with no legal infirmity warranting interference.