2016 (4) TMI 1039 - AT - Income Tax

Penalty under section 271(1)(c) - Held that - In the case under consideration although both the lower authorities have alleged that the assessee had furnished inaccurate particulars with a mala fide intention, the same has not been substantiated convincingly by the department so as to attract penalty. The only finding against the assessee is that she could not produce the relevant vouchers after a lapse of ten years. Even the Income Tax Act requires maintenance of records for only eight years. So it is harsh on the assessee to expect her to produce records for a period falling beyond the statutory prescribed limit. Moreover, the assessee has any way been taxed on the amount remaining unsubstantiated. However, drawing an inference as to the malafide intention of the assessee in this regard is a mere presumption. Hence, we are unable to concur with the observations of the Ld. Commissioner of Income Tax (Appeals) and set aside his order and direct that the penalty imposed be deleted. - Decided in favour of assessee

Summary

Issues:
Penalty under section 271(1)(c) for concealment of income particulars and inaccurate particulars.

Analysis:
1. The appeal was against the penalty confirmed by the Commissioner of Income Tax (Appeals) under section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed due to the assessee's failure to substantiate the claim of improvement to the property carried out in the financial year 1998-99. The original return of income declared a net taxable income, which was later revised after including capital gains. The penalty was imposed based on the surrender of an amount towards cost of improvement without proper documentation.

2. The penalty proceedings alleged mala fide intentions on the part of the assessee for surrendering the amount claimed as cost of improvement. The Assessing Officer (AO) imposed the penalty based on the assumption that the assessee would have evaded tax if not selected for scrutiny. The Commissioner upheld the penalty, citing the claim as mala fide. However, the Tribunal emphasized that penalty cannot be levied on presumptions alone and referred to the burden of proof on the revenue to establish concealment or inaccurate particulars.

3. The Tribunal highlighted the importance of primary evidence to establish concealment or inaccurate particulars by the assessee. Referring to a Supreme Court judgment, it emphasized that the burden of proof lies on the revenue department in penalty proceedings. The Tribunal also cited another Supreme Court case to clarify that making an incorrect claim does not necessarily amount to furnishing inaccurate particulars. The Tribunal found that the department failed to convincingly substantiate the mala fide intention attributed to the assessee and set aside the penalty imposed.

4. Ultimately, the Tribunal allowed the appeal of the assessee, stating that the penalty was not justified as the department did not provide sufficient evidence to support the claim of concealment or inaccurate particulars. The Tribunal considered the lapse of time, statutory record-keeping requirements, and the fact that the assessee had already been taxed on the unsubstantiated amount. Consequently, the penalty imposed under section 271(1)(c) was directed to be deleted.

5. In conclusion, the Tribunal's decision focused on the burden of proof on the revenue department in penalty proceedings, emphasizing the need for concrete evidence to establish concealment or inaccurate particulars by the assessee. The Tribunal found the penalty unjustified in this case due to the lack of convincing evidence supporting the claim of mala fide intentions on the part of the assessee.