2019 (2) TMI 1056 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - concealment or inaccurate particulars of income - HELD THAT - We find that the assessment in this case has been completed on the returned income. Hence, when the return of income and the assessed income are same, the machinery provision for levy of penalty u/s. 271(1)(c) fails, as the penalty u/s. 271(1)(c) is levied with reference to the tax sought to be evaded, which is the difference between the income returned and that assessed by the A.O. In this case, since the assessed income and the returned income are the same, the machinery provision of penalty u/s. 271(1)(c) fails. In this regard, we draw support in the case of CIT vs. SAS Pharmaceuticals 2011 (4) TMI 888 - DELHI HIGH COURT as expounded that penalty u/s. 271(1)(c) can only be levied if in the course of proceedings, the A.O. is satisfied that there is an concealment or furnishing of inaccurate particulars. The words in the course of any proceedings under this Act mean the assessment proceedings . However, the question whether there is concealment or inaccurate particulars has to be determined with reference to the returned income. Delete the levy of penalty. - Decided in favour of assessee.

Summary

Issues:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on bogus purchases.
2. Interpretation of the machinery provision for the levy of penalty when the assessed income matches the returned income.

Detailed Analysis:
Issue 1: The appeals by the assessee were against the orders of the Commissioner of Income Tax (Appeals) sustaining the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2009-10 to 2011-12, due to bogus purchases identified from information provided by the Sales Tax Department. The penalty amounts for the respective years were Rs. 2,97,983/-, Rs. 3,55,040/-, and Rs. 3,82,255/-.

Issue 2: The Tribunal noted that the assessment was completed on the returned income, and when the assessed income aligns with the returned income, the machinery provision for the penalty under section 271(1)(c) fails. The penalty is typically based on the difference between the income returned and the income assessed by the Assessing Officer. Citing the decision of the Hon'ble Delhi High Court in the case of CIT vs. SAS Pharmaceuticals [2011] 335 ITR 259 (Del), it was emphasized that the satisfaction of concealment or furnishing inaccurate particulars must be during the assessment proceedings. The determination of concealment or inaccurate particulars should be with reference to the returned income. Therefore, based on the precedent and the relevant legal interpretation, the Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and deleted the levy of penalty, ultimately allowing the appeals by the assessee.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the importance of the assessment proceedings and the alignment of the assessed income with the returned income in the context of levying penalties under section 271(1)(c) of the Income Tax Act, 1961.