2018 (1) TMI 811 - HC - Income Tax

Penalty under Section 271(1)(c) - assessee has not voluntarily withdrawn the benefit claimed u/s 54F but has revised the computation only after he has been cornered in the scrutiny proceedings and that too after one and a half year of the scrutiny proceedings - Held that - Penalty u/s 271(1)(c) may be imposed either if the assessee had concealed the particulars of his income or it had furnished inaccurate particulars of it s income. In case the assessing officer alleged concealment of such particulars it would have to be alleged and established as a fact that the assessee did something so as to hide or not disclose such particulars. Similarly, in case the assessing officer alleged furnishing of inaccurate particulars of income he would have to establish which particulars of income furnished was/were inaccurate as may have had a material bearing on determination/assessment of the true income of the assessee. Therefore, we are unable to accept the argument advanced by learned counsel for the assessee that the two charges that may invite a penalty under Section 271(1)(c) of the Act can never co-exist. It is too broad a proposition to merit acceptance or rejection in the facts of the present case. No independent reasoning has been recorded by the assessing authority to conclude that the assessee had furnished inaccurate particulars of his income. At the same time, finding as to concealment of particulars of income was duly supported with reasoning (as extracted above). Tribunal has erred in setting aside the entire penalty order. It should have examined the other grounds of appeal raised by the assessee including the ground that mere rejection of a claim or withdrawal of a claim did not amount to evidence or proof of concealment. We find that the Tribunal has not adjudicated the challenge raised by the assessee to the imposition of penalty for concealment, on merits. Assessing officer having imposed penalty for concealment of particulars of income upon reasoning given by him, the said order could not have been set aside in entirety merely because the assessing officer, in the later part of the penalty order also mentioned that the assessee had furnished inaccurate particulars of his income. The appeal is allowed. However, in view of the fact that the Tribunal has not recorded any finding on the grounds of appeal raised by the assessee whether as a fact the assessee had concealed particulars of his income, the matter is remitted to the Tribunal to decide the appeal afresh on that issue. It is requested to the Tribunal to proceed to hear and decide that issue in accordance with law, within a period of six months from the date of production of a certified copy of this order.

Summary

Issues Involved:
1. Justification of deleting the penalty under Section 271(1)(c) of the Income Tax Act by the Income Tax Appellate Tribunal.
2. Applicability of penalty under Section 271(1)(c) for furnishing inaccurate particulars of income and concealing particulars of income.

Detailed Analysis:

Issue 1: Justification of Deleting the Penalty under Section 271(1)(c) by the Tribunal
The Tribunal had deleted the penalty imposed under Section 271(1)(c) on the grounds that the assessing officer did not specify whether the penalty was for "concealment of particulars of income" or for "furnishing inaccurate particulars of income." The Tribunal emphasized that the assessing officer must clearly specify the charge and support it with facts. The Tribunal cited precedents from the Gujarat High Court in CIT Vs. Manu Engineering Works and New Sorathia Engineering Co. Vs. CIT, which held that the charges of concealment and furnishing inaccurate particulars are mutually exclusive and must be clearly delineated.

Issue 2: Applicability of Penalty for Furnishing Inaccurate Particulars and Concealing Income
The assessing officer had imposed the penalty on the grounds that the assessee had concealed particulars of his income and also furnished inaccurate particulars of income. The assessee argued that the wrong claim under Section 54F was made based on the advice of his previous counsel, and upon realizing the mistake, he revised his computation and paid the due tax. However, the assessing officer found this explanation unsubstantiated, noting that the previous counsel had died and no evidence was presented to support the claim of wrong advice.

The Tribunal's decision to delete the penalty was based on the legal technicality that the assessing officer had not specified the exact charge. The Tribunal noted that the penalty under Section 271(1)(c) could be imposed either for concealment or for furnishing inaccurate particulars, but not both simultaneously.

Court's Findings:
The High Court found that the Tribunal erred in setting aside the entire penalty order solely on the technical ground of non-specification of the charge. The High Court noted that the assessing officer had indeed recorded a positive finding of concealment of particulars of income, supported by reasoning. The Court emphasized that the charges of concealment and furnishing inaccurate particulars, while generally mutually exclusive, could coexist in a given set of facts, though this was not the case here.

The High Court remanded the matter back to the Tribunal to examine the issue of concealment of income on merits, as the Tribunal had not adjudicated this challenge. The Court directed the Tribunal to hear and decide the issue within six months.

Conclusion:
The High Court allowed the appeal, holding that the Tribunal had erred in setting aside the penalty order without examining the merits of the concealment charge. The matter was remitted back to the Tribunal for a fresh decision on whether the assessee had concealed particulars of his income.