2007 (7) TMI 275 - HC - Income Tax

Concealment of income - section 271(1)(c) penalty - it is not possible to hold that the non-filing of return by a previously assessed assessee amounts to concealment - penalty can not be imposed for concealment when the non-filing of return by an assessee who had been assessed for several assessment years prior to the assessment year in question that is 1984-85

Summary

Issues:
1. Justification of dismissing Departmental appeal and cancelling penalty under section 271(1)(c)
2. Legality of imposing penalty for concealment without invoking Explanation to section 271(1)(c)

Issue 1: Justification of dismissing Departmental appeal and cancelling penalty under section 271(1)(c)

The Tribunal, in its order, noted that the assessee had shown income in its return for a specific assessment year. It was highlighted that the assessee had been taxed for previous assessment years, indicating a history of compliance. The Tribunal agreed with the Commissioner of Income-tax (Appeals) that Explanation 3 under section 271(1)(c) did not apply in this case, as it is intended for individuals not previously assessed under the Act. The Tribunal also emphasized that failure to file a return does not equate to concealment of income, as concealment involves an affirmative act, while failure to file is a mere omission. Consequently, the Tribunal confirmed the order cancelling the penalty, asserting that penalty imposition in this scenario would be unjustifiable.

Issue 2: Legality of imposing penalty for concealment without invoking Explanation to section 271(1)(c)

Regarding the second issue raised, the Court expressed skepticism about the imposition of a penalty for concealment without invoking any Explanation to section 271(1)(c). The Court questioned the basis for imposing a penalty under different substantive provisions of the Income-tax Act for concealment when the circumstances, such as non-filing of a return by an assessee previously assessed for multiple years, do not align with the requirements outlined in Explanation 3 to section 271(1)(c). The Court concluded that in the absence of a relevant provision or explanation, the question of imposing a penalty for concealment in this context does not hold legal ground. Consequently, the Court dismissed the application, emphasizing the lack of legal merit in pursuing the second question raised.

In summary, the judgment by the Allahabad High Court addressed the issues surrounding the justification for dismissing the Departmental appeal and cancelling the penalty under section 271(1)(c), as well as the legality of imposing a penalty for concealment without invoking relevant provisions. The Court highlighted the distinction between non-filing of a return and concealment of income, emphasizing the need for specific legal grounds to impose penalties for concealment. Ultimately, the Court dismissed the application, emphasizing the lack of legal basis for the penalties in question.