2008 (7) TMI 363 - HC - Income Tax

Penalty u/s 271(1)(c) for concealment of Income - on the basis of an information, a notice under section 148 of the Act was issued on the ground that certain income chargeable to tax had escaped assessment. In response to the said notice, the assessee filed the return of income; wherein income was declared at ₹ 63,39,640, which, inter alia, included the entire amount of receipts on account of sale proceeds of the shares at ₹ 33,10,380 against long-term capital gain of ₹ 29,74,951 declared in the original return of income. Aassessee submitted that return of income is being voluntarily revised to include the entire amount of receipt along with other amount to buy peace of mind and to avoid hazards of litigation and also to save himself from any penal action Held that The assessing authority had failed to take any objection that the declaration of income made by the assessee in his revised return and in his explanation were not bona fide. Penalty has been deleted rightly.

Issues:
Imposition of penalty under section 271(1)(c) of the Income-tax Act for concealment of income.

Analysis:
1. The court addressed the issue of penalty imposition under section 271(1)(c) of the Income-tax Act in the case of four different assessees from the same family for the assessment year 1998-99. The appeals were filed against the common order of the Income-tax Appellate Tribunal. The primary concern was whether the penalty was rightly imposed on the assessee for filing a revised return after the detection of concealed income by the Department.

2. The assessee, involved in manufacturing cotton yarn and cotton waste, initially declared long-term capital gain on the sale of shares in the original return. However, upon receiving information that the sale of shares was bogus, the Department issued a notice under section 148 of the Act. The assessee then voluntarily revised the return to include the entire sale proceeds to avoid litigation and save from penal action. The Assessing Officer imposed a penalty under section 271(1)(c) based on intentional fraud to avoid higher tax rates.

3. The Commissioner of Income-tax (Appeals) later deleted the penalty, emphasizing that the additional income was declared in good faith to buy peace of mind and avoid litigation, with no evidence of non-genuineness found during assessment. The Tribunal upheld this decision, stating that the Department failed to prove concealment of income or furnishing inaccurate particulars. The Tribunal highlighted the importance of positive acts of concealment for penalty imposition.

4. The Department appealed the Tribunal's decision, arguing that the assessee deliberately furnished inaccurate particulars of income to avoid higher tax rates. However, the court found no merit in the appeal, noting that the revised return was filed in good faith after the notice under section 148, and the explanation provided by the assessee was not rejected during assessment. The court relied on precedents emphasizing the burden of proof on the Revenue to establish concealment.

5. Ultimately, the court dismissed the appeal, concluding that no substantial question of law arose. The Tribunal's decision to delete the penalty under section 271(1)(c) was upheld, as the Revenue failed to provide evidence of concealment, and the revised return was accepted in good faith by the assessing authorities.

This detailed analysis of the legal judgment addresses the issues involved in the imposition of penalties under section 271(1)(c) of the Income-tax Act, emphasizing the importance of evidence and good faith declarations by the assessee in tax matters.

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