2016 (12) TMI 1346 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - The evidence for delay in finalizing of taxaudit of the two concerns namely Neeta Developers and Choice Construction Chemicals in which the assessee was partner and which was handled by other partner could not be brought on record. In our considered view and in the interest of justice, we are inclined to set aside and restore this matter to the file of the ld. CIT(A) for fresh adjudication of penalty u/s 271(1)(c) of the Act de novo on merits after verification whether the contentions/explanation of the assessee are bonafide or not and whether the same constitute reasonable cause for said failure within mandate of Section 273 of the Act, as section 271(1)(c) of the Act is subject to Section 273 of the Act . The assessee is directed to appear before the ld. CIT(A) and submit all the evidences to substantiate his claim and to establish that the cause for failure to file return of income and pay taxes to Revenue are bonafide and constitute reasonable cause with in parameters of Section 271(1)(c) of the Act read with Section 273 of the Act.

Issues Involved:
1. Whether the penalty under Section 271(1)(c) of the Income-tax Act, 1961, was justified.
2. Whether the delay in filing the return of income was due to circumstances beyond the assessee's control.
3. Whether the assessee concealed particulars of income or furnished inaccurate particulars of income.
4. Whether the assessee's explanation for the delay in filing the return was reasonable and bona fide.

Issue-wise Detailed Analysis:

1. Justification of Penalty under Section 271(1)(c):
The assessee was penalized under Section 271(1)(c) for concealing particulars of income or furnishing inaccurate particulars. The penalty was levied because the assessee filed the return of income only after a search operation under Section 132 and subsequent notice under Section 143(2). The assessee argued that the delay in filing was due to the non-finalization of accounts of certain partnership firms and financial difficulties. However, the AO and CIT(A) found these explanations unsatisfactory and upheld the penalty, citing strict liability for concealment or inaccurate particulars as per the Hon'ble Supreme Court's ruling in Union of India & Ors. v. Dharamendra Textile Processors & Ors.

2. Delay Due to Circumstances Beyond Control:
The assessee contended that the delay in filing the return was due to the non-finalization of accounts of two partnership firms, Neeta Developers and Choice Construction Chemicals, which were under the control of other partners. Additionally, the assessee faced financial difficulties, preventing timely payment of taxes. The CIT(A) rejected this explanation, noting the lack of evidence for the delay in finalizing the accounts and financial difficulties.

3. Concealment or Furnishing Inaccurate Particulars:
The AO and CIT(A) concluded that the assessee concealed particulars of income or furnished inaccurate particulars because the return was filed only after the search operation. The CIT(A) emphasized that the additional income declared by the assessee was not voluntary but consequent to the search and seizure operation, where incriminating documents were found.

4. Reasonableness and Bona Fide of Explanation:
The Tribunal considered whether the assessee's explanation for the delay was reasonable and bona fide. The Tribunal noted the assessee's claims of non-finalization of accounts and financial difficulties but found no evidence supporting these claims. Therefore, the Tribunal set aside the matter to the CIT(A) for fresh adjudication, directing the assessee to provide evidence to substantiate the claims and establish that the delay was due to reasonable cause within the parameters of Section 273.

Conclusion:
The Tribunal restored the matter to the CIT(A) for fresh adjudication on the merits, requiring verification of the assessee's explanations and evidence. The appeal was allowed for statistical purposes, and the assessee was directed to substantiate his claims before the CIT(A).

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