2009 (7) TMI 66 - HC - Income Tax

Penalty u/s 271(1)(c) rejection of books of accounts - AO was called upon to produce books of account and other documents maintained by him in respect of the business, however, the assessee did not produce it on the pretext that the accountant, who maintains books of account, is absconding. The A.O. not accepting the explanation held that the assessee failed to comply with the terms of notice under Section 142 (1) and 143 (2) and accordingly, proceeded to make best judgment assessment under Section 144 and made a lump sum addition of Rs.3 lakhs on the profit disclosed by the assessee Held that since the assessee failed to explain the expenditure, penalty leviable

Summary

Issues:
Levy of penalty under Section 271(1)(c) of the Income Tax Act without proper satisfaction about concealment of income. Tribunal's reduction of expenses disallowance. Justification for penalty imposition by Assessing Officer. Appellant's argument against concealment of income. Discretion of Assessing Officer in penalty proceedings. Conflict of opinions on penalty imposition. Interpretation of Section 271(1)(c) and Explanations. Compliance with terms of notice under Sections 142(1) and 143(2).

Analysis:
The appellant appealed against the order of the Income Tax Appellate Tribunal (ITAT) challenging the levy of penalty under Section 271(1)(c) of the Income Tax Act, questioning the Assessing Officer's jurisdiction without proper satisfaction regarding concealment of income. The Tribunal reduced the addition made by the Assessing Officer from Rs. 3 lakhs to Rs. 2 lakhs, emphasizing the intentional aspect of non-production of account books. The appellant argued that mere disallowance of expenses does not equate to concealment of income, citing the case of T. Ashok Pai v. CIT, Bangalore.

The Assessing Officer initiated penalty proceedings under Section 271(1)(c) based on the addition made during assessment. The appellant failed to justify the expenses disallowance, leading to the imposition of a penalty of Rs. 95,000. The appellant contended that the Assessing Officer must be satisfied before initiating penalty proceedings, referring to Commissioner of Income-Tax v. Super Metal Re-Rollers.

The respondent argued that the Tribunal's decision reducing the addition to Rs. 2 lakhs has finality, invoking Explanation 1 of Section 271(1) to establish concealment of income. Citing Dilip N. Shroff v. JCIT, Mumbai, the respondent emphasized that concealment and furnishing inaccurate particulars require deliberate acts by the assessee. The respondent also highlighted the conflict of opinions on penalty imposition, referring to Dharmendra Textile Processors.

The judgment emphasized that penalty under Section 271(1)(c) is a civil liability, and willful concealment is not a prerequisite for civil liability. The explanations to the section impose strict liability on the assessee for concealment or inaccurate particulars. Overruling previous interpretations, the court held that the Tribunal's decision confirming the penalty imposition was in accordance with the law, leading to the dismissal of the appeal.