2019 (1) TMI 1463 - AT - Income Tax

Penalty u/s 271(1)(c) - allegation of concealment of particulars of income or furnishing inaccurate particulars of income during assessment proceedings - Held that - AO before initiating the penalty proceedings has not recorded satisfaction if the assessee has concealed particulars of income or has furnished inaccurate particulars of income so as to attract the provisions of section 271(1)(c) of the Act rather proceeded to levy the penalty by specifically writing in para 2 on page 3 of the penalty order that the record filed by the assessee not found to be correct. We are of the considered view that penalty levied by the AO and confirmed by ld. CIT (A) is not sustainable in the eyes of law, hence ordered to be deleted. Consequently, appeal filed by the assessee is allowed.

Summary

Issues:
1. Penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for alleged concealment of income.
2. Justification of dismissing the appeal by the CIT (Appeals).
3. Assessment of penalty based on additions made by the Assessing Officer.
4. Determination of whether the assessee concealed income or furnished inaccurate particulars during assessment proceedings.

Issue 1: The judgment concerns an appeal filed by an assessee against the penalty order passed under section 271(1)(c) of the Income-tax Act, 1961. The penalty was imposed based on alleged concealment of income amounting to ?28,68,750. The appellant contested the penalty order, arguing that the Assessing Officer (AO) did not conclusively establish whether the income particulars were concealed or inaccurately furnished during assessment proceedings.

Issue 2: The CIT (Appeals) confirmed the penalty by dismissing the appeal. However, the judgment highlights that the AO's penalty order lacked a clear finding regarding the nature of the alleged concealment or inaccuracy in the income particulars furnished by the assessee. The Tribunal noted that the AO's uncertainty in determining the exact nature of the non-compliance undermined the validity of the penalty.

Issue 3: The penalty was based on three additions made by the AO, including disallowance of interest deduction, failure to verify sales in the jewellery business, and lack of verification of jewellery purchases. The CIT (Appeals) upheld the penalty, but the Tribunal observed that the AO did not explicitly state that the assessee submitted incorrect or false documents. Merely making unsustainable claims does not amount to furnishing inaccurate particulars of income.

Issue 4: The judgment extensively references legal precedents to support the conclusion that the penalty was not justified. Citing the Supreme Court and Delhi High Court decisions, the Tribunal emphasized that the mere rejection of an assessee's claim does not automatically imply inaccurate particulars or concealment of income. Additionally, the AO's failure to establish deliberate concealment or furnishing of inaccurate particulars further weakened the case for imposing the penalty. Ultimately, the Tribunal ruled in favor of the assessee, concluding that the penalty was not sustainable in law and ordered its deletion.

In conclusion, the judgment delves into the nuances of penalty imposition under section 271(1)(c) of the Income-tax Act, emphasizing the importance of establishing deliberate concealment or furnishing of inaccurate particulars to warrant such penalties. The detailed analysis of the facts, legal principles, and precedents underscores the Tribunal's decision to delete the penalty imposed on the assessee.