2016 (5) TMI 15 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - It is seen that initially during the assessment proceedings, addition was made by the Assessing Officer because as per him, the brought forward losses were insufficient to cover the business profits for Assessment Year 2008-09. However, with the First Appellate Authority allowing the appeal of the assessee for Assessment Year 2005-06, the business losses to be set off against the income for Assessment Year 2008-09 have again increased so as to reduce the business income for Assessment Year 2008-09 to NIL. In our considered view, the starting point of determining concealment for imposing penalty is the return of income. In the present appeal, the Assessing Officer has not found any discrepancy, inaccuracy or concealment in the return. The Assessing Officer s view is totally misplaced and de hors any merit as section 271(1)(c) of the Income Tax Act, 1961 empowers the Assessing Officer to impose penalty on the assessee when such assessee has concealed the particulars of his income or has furnished inaccurate particulars. However, in the present appeal, there is nothing on record to hold that the assessee has either concealed the particulars of its income or furnished any inaccurate particulars thereof. We accordingly decide the issue in favour of the assessee and direct the Assessing Officer to delete the penalty. - Decided in favour of assessee

Summary

Issues:
- Imposition of penalty u/s 271(1)(c) of the Income Tax Act for assessment year 2008-09.
- Appeal against the penalty imposed by the Assessing Officer.

Analysis:

Issue 1: Imposition of Penalty u/s 271(1)(c)
The appeal was filed against the order confirming the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2008-09. The penalty was imposed due to the set off of brought forward business losses from the assessment year 2005-06 against the business income of the year under consideration, resulting in a declaration of NIL income. The Assessing Officer added back the set off amount to the income of the assessee and imposed a penalty of ?5,75,300. On appeal, the CIT(A) confirmed the imposition of penalty but reduced it to ?3,83,695. The CIT(A) upheld the penalty imposition stating that the appellant failed to disclose correct particulars of brought forward losses, leading to a breach of duty under section 271(1)(c). However, the CIT(A) reduced the penalty amount to ?3,83,695 considering the tax liability determined due to the assessment framed under section 153C of the Income Tax Act. The appellant challenged this decision, leading to further appeal.

Issue 2: Appeal Against Penalty
The appellant raised multiple grounds in the appeal, contesting the imposition of penalty under section 271(1)(c) by the CIT(A). The appellant argued that the return filed under section 153C included the brought forward loss of ?18,61,812 for the assessment year 2005-06, based on the returned loss of ?29,97,850. The appellant highlighted that the First Appellate Authority for the assessment year 2005-06 had deleted an addition, increasing the carried forward losses, which would be sufficient to offset the surplus for the assessment year 2008-09. The appellant contended that there was no concealment or furnishing of inaccurate particulars of income, as the claim made in the return was bona fide and all income particulars were disclosed. The appellant sought the deletion of the penalty based on these grounds.

Judgment:
After considering the submissions and relevant material, the Tribunal found that there was no discrepancy, inaccuracy, or concealment in the return of income filed by the appellant. The Tribunal concluded that the Assessing Officer's view was without merit as there was no evidence to suggest that the appellant had concealed or furnished inaccurate particulars of income. Therefore, the Tribunal decided in favor of the appellant and directed the Assessing Officer to delete the penalty imposed under section 271(1)(c). As a result, the appeal of the assessee was allowed, and the penalty was set aside.

Conclusion:
The Tribunal's decision favored the appellant, ruling in favor of deleting the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2008-09. The Tribunal found no evidence of concealment or furnishing inaccurate particulars of income, leading to the penalty being set aside.