2008 (9) TMI 113 - HC - Income Tax

Concealment of income penalty return submitted in pursuance of notice u/s 148 showing higher income than returned in original return,- ITAT set aside the penalty on ground that assessee had voluntarily surrendered the income - nothing was produced by revenue to establish, that the assesses had concealed the income revenue s contention that Mens-rea is not one of the essential ingredient, for attracting liability, u/s 271, is not acceptable penalty was rightly set aside

Summary

Issues:
- Whether surrendering additional income during re-assessment raises a presumption of concealment of income for penalty proceedings under Section 271(1)(c)?

Analysis:
The case involved three appeals filed by the Revenue against a common tribunal judgment. The appeals questioned whether, in a scenario where an assessee submits a return showing higher income than the original return due to a survey revealing additional income, can a presumption of concealment be raised under Explanation 1 to Section 271(1)(c) for penalty proceedings during re-assessment. The appeals pertained to the same assessee for three different assessment years - 1995-1996, 1996-1997, and 1997-1998.

The assessee had voluntarily surrendered additional income during a survey conducted at their factory premises, leading to revised returns being filed and accepted. However, penalty proceedings under Section 271(1)(c) were initiated alongside the assessment orders. The Commissioner set aside the penalties, reasoning that the surrender was voluntary and not indicative of concealment. This decision was upheld by the Tribunal, citing relevant case laws and judgments.

The Revenue contended that the surrender of income by the assessee, despite not admitting to concealment, should trigger the presumption of concealment under Explanation 1 to Section 271(1)(c). They argued that the penalty was rightly imposed, contrary to the decisions of the Commissioner and the Tribunal. The assessee, on the other hand, relied on various judgments, including those of the Supreme Court, to support the dismissal of penalties.

The High Court, after considering the arguments and relevant case laws, concluded that the findings of the lower authorities regarding the penalty were factual and not perverse. Citing the Sudarshan's case and other precedents, the Court emphasized that unless the findings are deemed to be erroneous, the Court should not interfere. Therefore, the appeals were dismissed, upholding the decisions of the Commissioner and the Tribunal to set aside the penalties.

In summary, the High Court ruled that the voluntary surrender of income by the assessee, without clear evidence of concealment, did not warrant the imposition of penalties under Section 271(1)(c). The Court's decision was based on established legal principles and precedents, emphasizing the importance of factual findings in penalty proceedings.