2007 (7) TMI 286 - HC - Income Tax

Tribunal deleted penalty imposed u/s 271(1)(c) holding no concealment or default for furnishing inaccurate particulars of income - receipt was shown by the assessee during 1986-87 on accrual basis after effecting the change in the method of accountancy - permission of AO was not required to effect the change of accounting system - Department has accepted that receipt on accrual as assessment was completed u/s 143(3) revenue has failed to point out as to what was wrong in planning the affair in the way the assessee did and what loss the Revenue has suffered deletion of penalty justified

Summary

Issues:
1. Justification of dismissing the appeal of Revenue regarding penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Confirmation of deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961 by the Income-tax Appellate Tribunal.

Issue 1:
The High Court addressed the first issue regarding the justification of dismissing the appeal of the Revenue concerning the penalty under section 271(1)(c) of the Income-tax Act, 1961. The case involved an assessee, a partnership firm deriving income from job work, which filed a return declaring total income for the assessment year 1987-88. The Assessing Officer assessed the income at a higher amount, treating the additional income as concealed income due to alleged inaccurate particulars furnished by the assessee. Consequently, a penalty was imposed under section 271(1)(c) of the Act. However, the Commissioner of Income-tax (Appeals) deleted the penalty, leading to an appeal by the Revenue before the Tribunal. The Tribunal upheld the deletion of the penalty, emphasizing that the assessee had shown the disputed receipt in a previous assessment year and had genuinely offered to adjust it in the current year, which was not accepted by the Assessing Officer. The Tribunal concluded that there was no concealment or furnishing of inaccurate particulars, as per section 271(1)(c) of the Act. The High Court agreed with the Tribunal's findings, stating that the facts did not attract the provisions of section 271(1)(c), thus justifying the dismissal of the Revenue's appeal.

Issue 2:
The second issue revolved around the confirmation of the deletion of the penalty under section 271(1)(c) of the Income-tax Act, 1961 by the Income-tax Appellate Tribunal. The Tribunal's decision to confirm the deletion was based on the fact that the disputed receipt had been properly accounted for by the assessee in a prior assessment year and the offer made by the assessee for adjustment in the current year was considered genuine and bona fide. The Tribunal highlighted that the Assessing Officer had failed to demonstrate any wrongdoing in the assessee's tax planning or any loss suffered by the Revenue. Additionally, the Tribunal noted that the Assessing Officer misinterpreted the legal precedent cited, emphasizing that citizens have the right to adjust tax planning to reduce tax burden. Consequently, the Tribunal found no grounds for concealment or furnishing inaccurate particulars of income under section 271(1)(c) of the Act. The High Court concurred with the Tribunal's reasoning, concluding that the Revenue's appeal lacked merit, and thus answered both questions against the Revenue and in favor of the assessee.

This detailed analysis of the judgment from the Punjab and Haryana High Court provides a comprehensive understanding of the issues involved and the court's reasoning in addressing each issue.