2018 (3) TMI 1466 - HC - Income Tax

Imposition of penalty u/s 271(1)(c) - deliberate claim of loss of sale though the same was not an actual state of affairs - reason given by the assessee that the assessee was advised by the Chartered Accountant - Held that - The Tribunal in its order relied on the Judgment of the Apex Court in a case of Dilip N. Shroff Vs. JCIT and another (2007 (5) TMI 198 - SUPREME Court) and observed that there has to be a conscious concealment on the part of the assessee and that a mistake in not returning any income by itself would not constitute reason enough for imposition of penalty. The Tribunal has accepted the contention of the assessee on the basis of the affidavit filed by the Chartered Accountant / advisor that he gave wrong advise and the situation were explained about the bona-fide error being committed with regard to the applicability of the provision of law. The benefit was claimed on the basis of the deleted provision wherein the assessee had debited the amount to the profit and loss account on account of loss of sale of vehicles. The assessee was not entitled for it as it was not engaged in driving of vehicles. It would also be clear that the survey was made only on 10th February, 2004 and on the basis of the same the matters were taken up for assessment years 1999-2000, 2000-2001, 2001-2002, 2002-2003 and 2003-2004. The Tribunal on merits has taken a plausible view. No substantial question of law.

Summary

Issues:
1. Appeal against Tribunal order allowing assessee's appeals for multiple assessment years.
2. Tax liability less than ?20 Lacs - Department decision not to prosecute appeals.
3. Allegation of deliberate false claim of loss by the respondent.
4. Reliance on Chartered Accountant's advice and legal precedents.
5. Applicability of Central Board Direct Taxes Circular.
6. Tribunal's reliance on Apex Court judgment regarding penalty imposition.
7. Explanation of erroneous claim by Chartered Accountant.
8. Dismissal of Tax Appeals by the High Court.

Analysis:
1. The High Court considered appeals challenging the Tribunal's decision favoring the assessee for assessment years 1999-2000 to 2003-2004. The tax liability in these cases was below ?20 Lacs, aligning with the Department's decision not to pursue appeals for such amounts as per a Circular.

2. The appellant contended that the respondent falsely claimed a loss, arguing that reliance on advice from a Chartered Accountant was not a valid defense. Legal precedents were cited to support this argument, emphasizing the responsibility of the assessee despite professional advice.

3. The respondent, supported by legal counsel, justified the claim under the Circular dated 10th December, 2015. The Court examined these submissions in detail to reach a decision.

4. The Tribunal's decision was influenced by an Apex Court judgment stating that conscious concealment is necessary for penalty imposition, highlighting that a mere mistake in income reporting does not warrant penalties. The Tribunal accepted the explanation provided by the Chartered Accountant regarding the erroneous claim of loss.

5. The Tribunal's decision was based on the Chartered Accountant's affidavit, explaining the bona fide error made in claiming the benefit. The Tribunal found the explanation plausible, leading to the dismissal of the substantial question of law. The appeals were ultimately dismissed by the High Court, with no costs imposed.