2016 (12) TMI 1089 - HC - Income Tax

Levy penalty under Section 271(1) (c) - Held that - In the present case there is not even a remote suggestion of there being any falsehood of about there being any material details and particulars supplied by the assessee to the department. It is true that their claim was not accepted but that not in itself comes to the inevitable conclusion that the details supplied by the assessee were false, inaccurate or suffered from any concealment. In the absence of any finding with regard to the concealment or with regard to lack of bonafidies of the assessee in furnishing correct material particulars, no penalty would be attracted under the provisions of Section 271 (1) (c) of the Act. - Decided in favour of assessee

Summary

Issues involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Consideration of material and information available on record.
3. Applicability of relevant provisions of law.
4. Justification of penalty imposition on specific items.
5. Interpretation of Section 271(1)(c) regarding false declaration or concealment of facts.

Detailed Analysis:
1. The appeal was filed under Section 260A of the Income Tax Act, 1961 against the order passed by the Tribunal for the assessment year 1982-83. The primary issue was whether the order upholding the penalty under Section 271(1)(c) was vitiated by non-consideration of available material and relevant legal provisions.
2. The appellant, a public limited company, maintained records and filed a return declaring a loss. The assessment was completed at a significantly higher income, leading to penalty proceedings under Section 271(1)(c) for alleged concealment and inaccuracies in income particulars.
3. The Commissioner of Income-tax (Appeals) canceled the penalty after finding that the disallowed expenses were actually incurred, and no falsity could be attributed to the claims. The first appellate authority interpreted the deeming provision of Explanation-1 to Section 271(1)(c) in favor of the appellant.
4. The ITAT reversed the cancellation of penalty on five items, focusing on specific disallowances. The discussion centered on the justification of penalties imposed on particular items, especially item nos. 12 & 13, which were considered debatable due to legal challenges and retrospective provisions.
5. The Court analyzed the imposition of penalties under Section 271(1)(c) based on the presence of false declarations or concealment of facts. It was emphasized that mere unsustainable claims do not attract penalties if no false details were supplied. Precedents were cited to support the argument that penalties require findings of concealment or lack of bonafide intentions, which were absent in this case.
6. After considering arguments from both sides and reviewing the record, the Court concluded that no concealment or false declarations were proven, leading to the setting aside of penalties imposed on specific items. The substantial questions of law were answered in favor of the appellant, and the appeal was disposed of without costs.