2016 (3) TMI 862 - AT - Income Tax

Penalty u/s. 271(1)(c) - outstanding excise duty - Excise Department has carried out an inspection on the premises of the assessee - Held that - The stand of the assessee is that invoice value shown by it was of ₹ 9,33,500/-. This invoice value has been revised by the Excise Authorities to the figure of ₹ 15,69,724/-. It puts a tax liability of ₹ 1,03,832/-. Keeping in view the smallness of the amount involved the assessee did not litigate with the Excise Authorities. According to the assessee, it does not mean that he has accepted the calculation made by the Excise Authorities, even for the purpose of visiting the assessee with penalty. We have perused the assessment orders, i.e., dated 04.02.2007 as well as 29.12.2010 passed u/s 143(3) and 143(3) r.w.s. 263 of the Income-tax Act. We find that the Assessing Officer nowhere independently analyzed the material or the evidences collected by Excise Authorities. He simply proceeded against the assessee on the basis of information collected from Excise Authorities. The nature of that information has never been analyzed for the purpose of making addition to the income of the assessee. That type of evidence cannot be relied upon for the purpose of visiting the assessee with penalty. The degree of evidence ought to be of a little higher standard, because the penalty proceedings could expose the assessee with prosecution also. Merely the assessee did not dispute with Excise Authorities does not mean that, in case of penalty proceedings if it challenges the very basis of addition, it will be denuded from his rights to challenge the nature of evidence. In our opinion, the evidence relied upon by the Assessing Officer does not falsify the explanation of the assessee as discernable from the note no.2 of the Auditors Report prepared u/s 44AB of the Act. In view of the above discussion, we allow the appeal of the assessee and delete the penalty. - Decided in favour of assessee

Summary

Issues:
Assessment of penalty under section 271(1)(c) of the Income-tax Act based on alleged concealment of income or furnishing inaccurate particulars.

Detailed Analysis:
1. The assessee appealed against the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act for the Assessment Year 2006-07.

2. The grounds of appeal by the assessee were found to be descriptive and argumentative, challenging the confirmation of the penalty of Rs. 2,14,152 by the Commissioner of Income-tax (Appeals).

3. The case involved the assessee, engaged in manufacturing and trading, who filed a return of income declaring Rs. 2,53,076. Subsequently, the assessment order determined the total income at Rs. 2,76,980. The assessment was deemed erroneous and prejudicial to revenue, leading to a re-assessment where an addition of Rs. 6,36,224 was made based on an inspection by the Excise Department.

4. The Commissioner of Income-tax (Appeals) upheld the penalty imposed, leading to the appeal by the assessee.

5. The assessee argued that the Excise Authorities calculated the invoice value differently, resulting in the penalty imposition. The Assessing Officer did not independently analyze the evidence collected, merely relying on the information provided by the Excise Authorities. The assessee's explanation was not falsified by the evidence.

6. The Departmental Representative supported the lower authorities' orders, emphasizing that the penalty was justified after due consideration.

7. The Tribunal considered the provisions of section 271(1)(c) of the Act, which require satisfaction that the assessee concealed income or furnished inaccurate particulars. The penalty can range from 100% to 300% of the tax sought to be evaded. The deeming provisions under Explanation 1 apply in cases of failure to offer explanations or failure to substantiate explanations.

8. The Tribunal found that the evidence relied upon by the Assessing Officer did not meet the required standard for imposing a penalty. The assessee's explanation was not disproved, and the nature of the evidence was insufficient to justify the penalty.

9. Consequently, the Tribunal allowed the appeal of the assessee and deleted the penalty imposed under section 271(1)(c) of the Income-tax Act.

10. The judgment was pronounced on 10th February 2016 at Ahmedabad by the Appellate Tribunal ITAT Ahmedabad.