2009 (10) TMI 14 - HC - Income Tax

Penalty u/s 271(1)(C) held that - While perusing the order of the Commissioner of Income-tax, it reveals that penalty has been levied on the basis of the additions which are made either due to difference of opinion or merely on presumptions or of routine nature. Before imposing penalty for concealment of income, the Assessing Officer should bring concrete evidence or material on record for his satisfaction that income has been concealed or inaccurate particulars thereof have been furnished - Mere initiation of proceedings under Section 271(1)(c) cannot be assumed that such a satisfaction was arrived at by the Assessing Officer. Accordingly, the appeal was allowed and the penalty deleted being not sustainable.

Summary

Issues:
1. Penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Justifiability of penalty deletion by the Income Tax Appellate Tribunal.
3. Requirement of concrete evidence for imposing penalty for concealment of income.

Analysis:
Issue 1: The appellant contended that the penalty imposed under Section 271(1)(c) was debatable due to the addition on the account of Exchange Variation Reserve. The Income Tax Appellate Tribunal had deleted the penalty, considering the issue as 'debatable.' The appellant questioned the Tribunal's decision on the legality of the penalty imposition.

Issue 2: The Court referred to the case of CIT v. Harshvardhan Chemicals & Minerals Ltd., where the Rajasthan High Court upheld the Tribunal's decision that no penalty was leviable when the deduction claimed by the assessee was debatable. The Court emphasized that concrete evidence is necessary for the satisfaction of income concealment before imposing a penalty. The Tribunal's decision to delete the penalty was upheld based on the lack of concrete evidence by the Assessing Officer.

Issue 3: The Court highlighted the importance of the Assessing Officer providing reasons for imposing a penalty and the necessity of concrete evidence to establish income concealment. The Court agreed with the Commissioner's decision to delete the penalty, emphasizing the requirement for a solid basis for such penalties. The Court dismissed the appeal filed by the Commissioner of Income-tax, affirming the decision to delete the penalty.

In conclusion, the Court upheld the Tribunal's decision to delete the penalty imposed under Section 271(1)(c) due to the debatable nature of the issue and the lack of concrete evidence for income concealment. The Court emphasized the necessity of providing reasons for imposing penalties and the requirement for solid evidence before penalizing for income concealment. The appeal filed by the Commissioner of Income-tax was dismissed based on these considerations.