2019 (3) TMI 206 - HC - Income Tax

Penalty u/s 271(1)(c) - assessee filed its return under VDIS but failed to pay the tax - maximum penalty levy - HELD THAT - It is an admitted fact that initial declaration was made by the assessee under VDIS. The proof for payment of advance tax within the allowable time is not dispute. Till that stage, the Department was absolutely unaware of the fact that the assessee having earned any such income. Had the VDIS complied with the payment of tax, etc. the question of levy of penalty would not have been agitated. Admittedly the tax has not been paid by the assessee on the income declared under VDIS. This itself will not lead to the conclusion that the assessee has concealed its particular of income as the concealment, as we discussed, means something more with the malafide intention coupled with mens rea. Tribunal was right in holding that penalty u/s 271(1)(c) can not be levied in a case where the assessee filed its return under VDIS but failed to pay the tax. No substantial question of law.

Summary

Issues:
Whether penalty under Section 271(1)(c) can be levied when the assessee filed its return under VDIS but failed to pay the tax.

Analysis:
The appeal was filed by the Revenue against the order of the Income-tax Appellate Tribunal regarding the imposition of penalty under Section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 1995-96. The main issue was whether the Tribunal was correct in holding that the penalty could not have been levied by the Assessing Officer. The Tribunal found that the penalty was imposed based on the fact that the assessee had mentioned income admitted in an invalid declaration filed under the Voluntary Disclosure Scheme, 1997, but later reduced the same income from the total income claiming it was already declared under VDIS, 1997. The Tribunal held that the assessee falsely claimed the income was offered under VDIS, 1997, even though the declaration was not accepted by the Commissioner of Income Tax, leading to the imposition of maximum penalty.

The assessee then appealed to the Commissioner of Income Tax (Appeals) who accepted the explanation provided by the assessee for not initially disclosing the amount mentioned in the VDIS application. The CIT(A) found the explanation acceptable and deleted the penalty. The Revenue challenged this decision before the Tribunal, which analyzed the explanation offered by the assessee and their conduct. The Tribunal, after considering the facts and the conduct of the assessee, dismissed the appeal filed by the Revenue. The Tribunal found the conduct of the assessee to be bona fide, as they voluntarily offered the income for taxation in a revised return before any concealment was detected during the assessment process.

The Tribunal highlighted the cooperation of the assessee with the Department in bringing the income to tax and found that the initial declaration under VDIS was made before the Department was aware of the income. The Tribunal emphasized that the failure to pay tax on the income declared under VDIS did not automatically imply concealment of income, as concealment requires a malicious intention. The High Court reviewed the Tribunal's order and found no substantial question of law to consider. Therefore, the appeal filed by the Revenue was dismissed, and no costs were awarded.