2016 (12) TMI 355 - HC - Income Tax

Levy of penalty under Section 271(1)(c) - whether this was a case of bonafide mistake and not a case of conscious concealment or furnishing of inaccurate particulars? - Held that - This is not a case where the Assessee has made full and complete disclosure of all facts and its claim on facts as disclosed has not been accepted. This is a case where the Assessee has filed inaccurate particulars of income which led to concealment of income chargeable to tax. It is also to be noted that in absence of reopening of the Assessment by the Assessing Officer on detection of non inclusion of ₹ 34 lakhs as a part of its closing stock, the aforesaid amount would have escaped income to tax. This is so as the Appellant Assessee had not even made any attempt to file a revised return prior thereto or even suo motu bring it to be notice of the Assessing Officer that there was mistake in filing original return and tax on ₹ 34 lakhs is payable. The Supreme Court in Union of India and Others Vs. Dharmendra Textile Processors and Others 2008 (9) TMI 52 - SUPREME COURT has held that Section 271(1)(c) of the Act indicate an element of strict liability on the assessee for concealment or filing inaccurate income. Wilful concealment is not an essential ingredient for attracting civil liability of penalty as is the case in prosecution under Section 276C of the Act. The Court held that penalty under Section 271(1)(c) of the Act is in the nature of civil liability and mensrea is not necessary. The decision cited by the petitioner of the Kerala High Court in India Sea Foods (1995 (2) TMI 9 - KERALA High Court) is no longer good law in view of the Supreme Court s decision in Dharmendra Textile Processors (supra). Thus all authorities have come to concurrent findings of fact that the Appellant assessee has filed inaccurate particulars of the income. - Decided against assessee

Summary

Issues involved:
Challenge to penalty under Section 271(1)(c) of the Income Tax Act, 1961 for bonafide mistake vs. conscious concealment or furnishing of inaccurate particulars.

Detailed Analysis:

1. Factual Background:
The appellant, engaged in property development, filed its income tax return for Assessment Year 2004-05 on 30th October 2004. The Assessing Officer completed the assessment on 22nd December 2006, determining the total income at ?5.65 crores. Subsequently, on 25th March 2009, the assessment was reopened as income chargeable to tax had escaped assessment. In the reassessment, the total income was determined at ?5.99 crores, including an addition of ?34 lakhs for repurchase of five flats not included in the closing stock.

2. Penalty Proceedings:
The Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Act, alleging that the appellant concealed income by not adding the ?34 lakhs to the closing stock valuation. The appellant contended it was a mistake, not intentional concealment. However, the Assessing Officer imposed a penalty of ?11.22 lakhs, being 100% of the tax on the concealed amount.

3. Appellate Proceedings:
The appellant appealed to the CIT (A), who upheld the penalty, stating inaccurate particulars were furnished. The Tribunal also dismissed the appeal, concluding that by not including the ?34 lakhs in the closing stock valuation, the appellant furnished inaccurate particulars leading to income concealment.

4. Legal Analysis:
The appellant argued before the High Court that the non-inclusion of ?34 lakhs was due to a bonafide mistake, not malafide intent. They cited a Kerala High Court decision that penalty cannot be imposed without conscious concealment. However, the High Court noted that all authorities found the appellant filed inaccurate particulars leading to income concealment, attracting penalty under Section 271(1)(c).

5. Judicial Interpretation:
The High Court emphasized that Section 271(1)(c) imposes strict liability, not requiring wilful concealment. Referring to a Supreme Court decision, it clarified that mens rea is not essential for civil liability under this section. The High Court held that the Kerala High Court's decision cited by the appellant was no longer valid in light of the Supreme Court's ruling.

6. Conclusion:
Considering the findings of all authorities and the absence of evidence to show perversity in the impugned order, the High Court dismissed the appeal, stating that the appellant's explanation was unsatisfactory. The High Court held that the question raised did not present a substantial question of law, leading to the dismissal of the appeal with no costs awarded.

This detailed analysis of the judgment highlights the factual background, penalty proceedings, appellate decisions, legal arguments presented, judicial interpretation, and the ultimate conclusion reached by the High Court in the case challenging the penalty under Section 271(1)(c) of the Income Tax Act, 1961.