2016 (9) TMI 9 - HC - Income Tax

Penalty levied u/s 271(1)(c) - assessee had furnished inaccurate particulars of the income - Held that - The assessee company was in its first year of incorporation subjected to survey operation. At the time when the due date for filing return had not expired. During the survey the assessee admitted certain bogus share application money to the tune of ₹ 5.86 crores. Before the expiry of the due date for filing return, assessee also filed a return making matching disclosures. The Assessing Officer made no additions in this income but, desired to levy penalty on the ground that the assessee had furnished inaccurate particulars of the income. To our mind, such penalty could not have been imposed as rightly held by the Tribunal. Section 271 of the Act provides for penalty. Clause (c) of sub-section (1) of Section 271 of the Act provides that if the Assessing Officer during the course of any proceeding under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct such person to pay by way of penalty which shall not be less than, but which shall not exceed three times the amount of tax sought to be evaded by the reason of concealment of particulars or furnish inaccurate particulars of such income. As noted, the revenue desired to bring in the element of the assessee having furnished inaccurate particulars of its income. The fact that the assessee did make a disclosure of such income in the return filed and the Assessing Officer was not dissatisfied by such disclosure is not in dispute. The assessee having filed the return by the due date for filing return, in which such income was also offered to tax, the question of assessee having furnished inaccurate particulars of the income would not arise. - Decided in favour of assessee.

Summary

Issues:
1. Whether the Tribunal was correct in allowing the appeal and deleting the penalty imposed under Section 271(1)(c) of the Income Tax Act?
2. Whether the Tribunal was correct in not following the decisions of the Supreme Court and the Madras High Court in similar cases?

Analysis:
Issue 1:
The case involved an appeal by the Revenue against the judgment of the Income-Tax Appellate Tribunal, where the Tribunal had overturned the penalty imposed on the assessee for allegedly evading tax. The assessee, a company engaged in trading, had disclosed a sum during a survey operation, which the Assessing Officer considered as an attempt to evade tax. The penalty was imposed at 100% of the tax sought to be evaded. The CIT (Appeals) upheld the penalty, stating that the disclosure was not voluntary but a result of the survey. However, the Tribunal reversed this decision, leading to the current appeal. The Revenue argued that the disclosure was only made after the survey and would not have been offered if not for the operation. The Tribunal's decision was based on the fact that no penalty can be imposed in such a case.

Issue 2:
The Revenue relied on the Supreme Court's decision in the MAK Data case and other court judgments to support their argument for imposing the penalty. However, the Tribunal and the High Court held that the penalty under Section 271(1)(c) cannot be levied unless there is a clear case of concealing income or furnishing inaccurate particulars. The court emphasized that in this case, the assessee had filed the return within the due date, and no additions were made by the Assessing Officer. The court distinguished this case from previous judgments where penalties were upheld due to revised returns or additional disclosures made after detection of concealment.

In conclusion, the High Court dismissed the Tax Appeal, affirming the Tribunal's decision that the penalty under Section 271(1)(c) could not be imposed on the assessee in this case. The court highlighted the specific grounds required for levying such penalties and emphasized that the mere timing of the disclosure after a survey operation does not automatically warrant a penalty if the return was filed within the statutory timeline and no additions were made by the Assessing Officer.