2018 (1) TMI 1243 - HC - Income Tax

Penalty u/s 271(1)(c) - deemed dividend addition u/s 2(22)(e) - ITAT deleted penalty - Held that - In the light of the finding recorded by the Commissioner (Appeals), it is apparent that no inaccurate particulars of income have been furnished by the assessee so as to attract the provisions of section 271(1)(c) of the Act. Moreover, both the Commissioner (Appeals) as well as the Tribunal were of the view that since section 2(22)(e) of the Act creates a legal fiction whereby loans/advances received by the assessee are deemed as taxable income in the hands of the assessee in certain circumstances as specified therein, and when such facts have been available with the Assessing Officer there would be no question of concealment of any particulars of any fact per se. - Decided against revenue

Summary

Issues:
Challenge to deletion of penalty under section 271(1)(c) for assessment years 2008-09 and 2009-10 - Whether Tribunal justified in deleting penalties - Whether department proved inaccurate particulars of income - Whether deeming provision of section 2(22)(e) applicable for penalty - Failure of Tribunal to appreciate upheld quantum additions.

Analysis:
The appellant revenue challenged the Tribunal's common order deleting penalties under section 271(1)(c) for the assessment years 2008-09 and 2009-10. The issue revolved around whether the Tribunal was justified in deleting the penalties. The Assessing Officer treated loan amounts received by the assessee from a closely held company as deemed dividends, leading to penalty proceedings for furnishing inaccurate particulars of income. The Commissioner (Appeals) set aside the penalty, emphasizing that the transactions were disclosed and known to the Assessing Officer. The Tribunal upheld this decision, citing section 2(22)(e) as a deeming provision for taxable income. The Tribunal noted that loans under this provision artificially become dividends, and in the absence of malafides, upheld the penalty deletion.

For the first issue, the Tribunal's decision was based on the legal fiction created by section 2(22)(e) deeming loans as taxable income. The Tribunal found no concealment of particulars as the transactions were known to the Assessing Officer. The Commissioner (Appeals) and the Tribunal concurred that the legal fiction of section 2(22)(e) applied, precluding the imposition of penalties for inaccurate particulars. The court upheld the Tribunal's reasoning, dismissing the appeals. The court found no legal infirmity in the Tribunal's decision, leading to the summary dismissal of the appeals challenging the penalty deletions.