2016 (9) TMI 859 - HC - Income Tax

Penalty u/s 271(1)(c) - addition made to the income during the Assessment proceedings - unrecorded purchase - concealment of income with regard to sales - Held that - The fact that the Respondent Assessee had itself disclosed additional income during the course of the assessment proceedings, would not by itself lead to the conclusion of concealment of income. An admission made by a party contrary to facts on record would not estop a party, from pointing out/explaining the facts already on record in a correct although a different perspective. This is more particularly so, if the party is to be visited with an imposition of penalty. So far as intent is concerned, the same is of no consequence in interpreting a fiscal statute, while imposing a penalty for a breach of law. Penalty would visit a party, who has breached the law in fact and not on the basis of supposed intent. The last submission on behalf of the Revenue that the concealment is evident from the fact that the month wise statement of purchase and sales submitted by the Respondent Assessee indicated a negative stock. This in the present facts would be of no consequence, as the record indicates and it is not disputed by the Revenue, that there was unrecorded purchase of 4418 metric tones of goods, which would meet the shortage in stock in the month wise statement of purchase and sales of goods submitted by the Respondent Assessee. In the above view, the impugned order of the Tribunal cannot be found fault with. The finding of fact, as recorded by the Assessing Officer and CIT(A), is not disputed by the Tribunal in the impugned order. It is on consideration of these findings recorded by the lower authorities that the impugned order further takes into account only the unrecorded purchases which were ignored by the lower authorities which establishes that there is no concealment of income. - Decided in favour of assessee

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding penalty imposed under Section 271(1)(c) of Income Tax Act, 1961 for Assessment Year 1989-90.

Analysis:
1. Disclosure of Additional Income: The Respondent Assessee voluntarily offered additional income during assessment proceedings due to discrepancies in stock and sales figures. The Assessing Officer enhanced total income from ?4.50 lakhs to ?45.58 lakhs based on unrecorded purchases and suppressed sales. The Commissioner of Income Tax (Appeals) upheld the assessment order, leading to no further challenge by the Respondent Assessee.

2. Penalty Imposition: While the appeal on quantum proceedings was pending, the Assessing Officer imposed a penalty of 100% of tax sought to be evaded (?21.56 lakhs) under Section 271(1)(c) of the Act. The CIT(A) upheld the penalty, citing the Respondent Assessee's admission of discrepancies and additional income disclosure.

3. Tribunal's Decision: The Tribunal, in the impugned order, deleted the penalty, stating no concealment of income. It reasoned that unrecorded purchases covered negative stock, and sales discrepancies were immaterial as total sale proceeds were accounted for. The Tribunal found no concealment based on the record and material available.

4. Revenue's Argument: The Revenue contended that the Respondent Assessee concealed income, evident from admitted discrepancies and intent to reduce tax liability. The Revenue argued that the penalty should not have been overturned by the Tribunal.

5. Judicial Analysis: The High Court upheld the Tribunal's decision, emphasizing that the addition to income was due to a mistaken understanding by the Respondent Assessee, not concealment. The Court clarified that an admission by a party does not estop it from explaining facts correctly, especially in penalty cases. Intent is irrelevant in imposing penalties, which apply to actual breaches of law.

6. Conclusion: The High Court dismissed the appeal, ruling in favor of the Respondent Assessee. It affirmed the Tribunal's finding of no concealment based on unrecorded purchases and proper accounting of sales. The Court highlighted that penalties are for factual breaches, not supposed intent, and upheld the Tribunal's decision based on undisputed facts and lower authorities' findings.

7. Outcome: The substantial question of law was answered in favor of the Respondent Assessee, and the appeal was disposed of with no costs awarded. The High Court endorsed the Tribunal's deletion of the penalty, concluding that no concealment of income existed in the case.