2016 (8) TMI 816 - HC - Income Tax

Penalty u/s 271(1)(c) - Held that - For levy of penalty under section 271(1)(c) of the Act, the AO has to arrive at a positive finding as to whether the assessee was guilty of concealment of income in respect of particular amount or the assessee was guilty of furnishing of inaccurate particulars of income in respect of an amount. In the instant case, it is observed from the order of the AO that he has not arrived at a final conclusion as to whether the assessee was guilty of concealment of income, or the assessee was guilty of furnishing inaccurate particulars of income. The word and used in the order levying penalty clearly indicates that the AO could not clearly specify that assessee was guilty of either concealment of income or of furnishing of inaccurate particulars of income. See Commissioner of Incometax, Ahmedabad v. Reliance Petroproducts (P.) Ltd. reported in 2010 (3) TMI 80 - SUPREME COURT - Decided in favour of the assessee

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal reversing CIT(Appeals) findings and allowing appeal by assessee, substantial question of law regarding penalty under section 271(1)(c) of the Income Tax Act.

Analysis:

Issue 1: Challenge to Tribunal's Order
The Appellant, the Department, challenged the order of the Income Tax Appellate Tribunal that reversed the findings of the CIT(Appeals) and allowed the appeal by the assessee. The substantial question of law framed by the Court for consideration was whether the Tribunal erred in deleting the penalty imposed under section 271(1)(c) of the Income Tax Act.

Issue 2: Facts of the Case
The assessee, claiming non-resident Indian status, filed a return of income for the Assessment Year 2004-2005. Upon scrutiny, it was found that the assessee brought an amount from Dubai and stayed in India for 180 days during the relevant financial year. The Assessing Officer initiated penalty proceedings under section 271(1)(c) for concealing income and furnishing inaccurate particulars, resulting in a penalty of ?23,42,010 imposed on the assessee.

Issue 3: Arguments of Appellant
The counsel for the Department argued that the Assessing Officer found the assessee guilty of concealing income and furnishing inaccurate particulars, a finding upheld by the CIT(Appeals). Reference was made to a Karnataka High Court decision to support the contention that the Tribunal's order should be overturned.

Issue 4: Arguments of Respondent
The counsel for the respondent assessee relied on the Tribunal's finding that the Assessing Officer failed to conclusively determine whether the assessee was guilty of concealment or furnishing inaccurate particulars. Citing relevant case laws, including a Supreme Court decision, it was argued that the penalty was deleted due to legal errors in the Assessing Officer's order.

Issue 5: Court's Decision
After considering the arguments, the Court upheld the Tribunal's findings, especially emphasizing the importance of a definitive finding by the Assessing Officer for penalty under section 271(1)(c). Relying on precedents and evidence on record, the Court ruled in favor of the assessee and against the Department, thereby disposing of the matter.

This comprehensive analysis covers the issues involved in the legal judgment, detailing the contentions of both parties, the facts of the case, and the Court's decision based on the law and evidence presented.