2016 (6) TMI 252 - AT - Income Tax

Penalty u/s. 271(1)(c) - discount from IOC that was not accounted by the assessee - Held that - For levy of penalty apart from falsity of the explanation given by the assessee, the Department must have before it cogent material or evidence from which it could be inferred that the assessee has concisely concealed the particulars of income or had deliberately furnished inaccurate particulars of income. It is well settled that the parameters of judging the justification for addition made in the assessment case of the asssessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) of the Act on the preponderance of probabilities and Revenue has to prove that the claim of expenses by the assessee was not genuine or was inflated or the non-inclusion of income was to reduce its tax liability. Considering the aforesaid facts and peculiar facts of the case, and considering the fact that the amount has been offered to tax in subsequent assessment years and the assessee being a Government Corporation, we are of the view that in the present case no case for levy of penalty u/s. 271(1)(c) of the Act has been made out. We thus direct the deletion of penalty u/s. 271(1)(c) of the Act - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for non-accounting of discount receivable from Indian Oil Corporation (IOC) in the assessment year 2005-06.

Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act:
The appeal was against the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act on account of non-accounting of discount receivable from Indian Oil Corporation (IOC). The Assessing Officer held that the assessee furnished inaccurate particulars and made a wrong and excess claim of expenditure. The Commissioner of Income Tax (Appeals) confirmed the penalty. The assessee contended that there was no concealment of income or furnishing of inaccurate particulars, and the penalty should be deleted. The key argument was that the discount from IOC was not accounted for in the year under consideration due to genuine reasons, and it was subsequently included in the income in the following assessment year. The Tribunal observed that for the levy of penalty under section 271(1)(c), the Revenue must prove that the assessee deliberately concealed income or furnished inaccurate particulars. Since the discount was eventually offered to tax in subsequent years and considering the nature of the assessee being a Government Corporation, the Tribunal held that no case for penalty under section 271(1)(c) was made out. Consequently, the penalty was deleted, and the assessee's appeal was allowed.

2. Distinction between Assessment Proceedings and Penalty Proceedings:
The Tribunal emphasized the distinction between assessment proceedings and penalty proceedings. It noted that while certain additions or disallowances could be made in the assessment based on probabilities, the imposition of a penalty required concrete evidence of deliberate concealment or furnishing of inaccurate particulars. In this case, the Tribunal found that the Revenue did not present any material to suggest deliberate concealment by the assessee. The Tribunal relied on legal precedents to support its conclusion, highlighting that the justification for additions in assessment differs from the grounds for imposing a penalty under section 271(1)(c).

3. Legal Precedent and Supporting Arguments:
The assessee's arguments were supported by legal precedent, specifically citing the case of CIT vs. Reliance Petroproducts Pvt. Ltd. The Tribunal considered the submissions made by the assessee, including the fact that the discount was eventually accounted for in the subsequent assessment year, and that there was no financial gain for the assessee in not including the discount in the year under consideration. The Tribunal found merit in these arguments, leading to the deletion of the penalty under section 271(1)(c).

4. Final Decision and Conclusion:
After considering the contentions of both parties, reviewing the orders of the lower authorities, and analyzing the relevant legal provisions, the Tribunal concluded that no grounds existed for the levy of penalty under section 271(1)(c) of the Income Tax Act. The Tribunal, therefore, directed the deletion of the penalty and allowed the assessee's appeal. The decision was pronounced on 11 May 2016 at Ahmedabad.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by the parties, the legal principles applied by the Tribunal, and the final decision rendered in the case.