2017 (2) TMI 321 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee made certain claims by way of business expenditure in the return of income but was not able to substantiate these claims - Held that - There is no conclusive proof that the assessee concealed income or furnished inaccurate particulars of income. The AO has not brought enough incriminating material for concealment and there is no material for establishing the concealment independently in the given facts and circumstances of the penalty is not leviable, because all the documents submitted by the assessee were neither rejected by the AO as false or incorrect facts nor AO had clinching any further evidence of concealment of facts. Further find that the assessee has admitted the addition only to avoid hazards of litigation and to buy the peace but the same do not constitute admission for the purpose of levying penalty. Section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. On the facts and circumstances of this case the assessee s conduct cannot be said to be contumacious so as to warrant levy of penalty. - Decided in favour of assessee

Summary

Issues:
Penalty imposition under section 271(1)(c) - Jurisdiction, facts, and circumstances considered

Analysis:
The appeal was filed against the order passed by the Ld. CIT(A)-2, New Delhi relating to Assessment Year 2002-03, where the penalty of ?1,78,500 was confirmed under section 271(1)(c) without assuming jurisdiction as per law and without considering the facts and circumstances of the case. The objection raised by the Registry regarding Tribunal fee was dismissed based on a High Court decision, making the appeal maintainable. The case involved the imposition of penalty for furnishing inaccurate particulars of income and concealment of income, initiated after the assessee failed to reply to penalty notices. The AO imposed the penalty based on the addition treated as concealed income, without requiring proof of mens rea post the introduction of Explanation to Section 271(1)(c).

The assessee contended that no inaccurate particulars were furnished and relied on the Supreme Court decision in CIT vs. Reliance Petroproducts Pvt. Ltd., arguing that the penalty should be deleted. The authorities below upheld the penalty, leading to the appeal before the Tribunal. During the hearing, the assessee presented documentary evidence and argued against the imposition of penalty based on lack of conclusive proof of concealment or furnishing inaccurate particulars. The Tribunal noted that the AO did not provide enough incriminating material for concealment and that the assessee admitted the addition to avoid litigation, not as an admission of concealment.

The Tribunal referred to the Supreme Court decision in CIT vs. Reliance Petro Products Ltd. and the Hindustan Steel case, emphasizing that penalty under section 271(1)(c) should be imposed only in cases of deliberate defiance, contumacious conduct, or conscious disregard of obligations. The Tribunal found that the assessee's conduct did not warrant penalty imposition and set aside the orders of the authorities below, deleting the penalty. Consequently, the appeal filed by the assessee was allowed, and the penalty was not upheld.

The judgment was pronounced on 02/02/2017 by the Appellate Tribunal ITAT Delhi, with detailed analysis and references to legal precedents supporting the decision to delete the penalty imposed under section 271(1)(c) for the Assessment Year 2002-03.