2018 (8) TMI 727 - HC - Income Tax

Levy of penalty u/s 271(1) - allegation of concealment of income - the accounts filed by the appellant was audited by the Chartered Accountant and the assessment was completed by applying flat rate on the turn over disclosed by the appellant - application of explanation 1A to Section 271(1)(c) - Held that - The AO while finalising the assessment under Section 143(3) of the Act did not believe the story set up by the assessee for loss of books of account and invoked the provisions of Section 145(3) of the Act. CIT(A) also specifically rejected the contention of the assessee for loss of books of account and hold that it was a cooked up story of the assessee and did not find any merit in the appeal. The assessee could not furnish any explanation except setting up a cooked up story for loss of the books of account. It was admitted case that the books of account were maintained in the computer. The assessee did not even furnish the computer generated copies of the books of account. Levy of penalty confirmed - Decided against the assessee.

Summary

Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal.
2. Justification of penalty imposition on the appellants.
3. Correctness of holding that the appellant concealed income.
4. Validity of penalty under Section 271(1).
5. Interpretation of various court judgments.
6. Applicability of explanation 1A to Section 271(1)(c) of the Act.

Analysis:
1. The case involves an Income Tax Appeal against the order of the Income Tax Appellate Tribunal, Lucknow Bench 'A', regarding penalty imposition on the appellants for concealing income during the assessment year 2003-04.

2. The Tribunal upheld the penalty, stating that the assessee, a partnership firm engaged in civil construction work, failed to produce books of account and other necessary documents during assessment proceedings. The AO applied a net profit rate on total contract receipts due to the unavailability of records, resulting in an income determination of ?14,92,250.

3. The CIT(A) confirmed the application of an 8% profit rate and rejected the claim of lost books of account as a fabricated story. Subsequently, penalty proceedings under Section 271(1)(c) were initiated, leading to a penalty of ?4,44,723 imposed by the AO, which was later set aside by the CIT(A) citing lack of proof of concealment.

4. The Department appealed against the CIT(A)'s decision, and the Tribunal ruled that deliberate non-production of records amounts to concealment of income. The Tribunal found the assessee's actions as an attempt to hide income, leading to the restoration of the penalty imposed by the AO.

5. The Tribunal emphasized that the failure to provide books of account and related details constitutes concealment of income. The deliberate withholding of information, despite multiple opportunities, indicated an intent to misrepresent income, justifying the penalty imposition.

6. The judgment concluded by upholding the Tribunal's decision, dismissing the appeal, and ruling in favor of the Revenue. The deliberate attempts by the assessee to conceal income throughout the assessment proceedings validated the penalty imposition under Section 271(1)(c) of the Income Tax Act, 1961.