2020 (9) TMI 971 - HC - Income Tax

Penalty u/s. 271(1)(c) - advances shown as purchases - furnishing inaccurate particulars of income - gross negligence in not making necessary adjustments, additions and disallowance in the accounts which resulted in incorrect income being shown - CIT(A) and the Tribunal held in favour of the assessee by examining his conduct - HELD THAT -Assessment was completed and the case on hand is not the case where the assessment was re-opened under Section 147 - On taking note of the factual position, the CIT(A) exercised its discretion and granted relief to the assessee. The factual situation was examined by the Tribunal and it came to a conclusion that the CIT(A) was right in deleting the penalty. With regard to the non-inclusion of ₹ 22 lakhs in the closing stock, the Tribunal remanded the matter to the Assessing Officer for proper verification and fresh adjudication as per law. Thus, taking into consideration that the entire issue before us is factual, we decline to exercise our jurisdiction under Section 260-A of the Act, as we are not expected to examine the correctness of the order of the Tribunal, as being a third Appellate Authority. No substantial question of law.

Summary

Issues:
1. Correctness of the decision of the Tribunal in holding the penalty imposed on the assessee u/s.271(1)(c) of the Income Tax Act.
2. Whether the Tribunal was right in not making necessary adjustments, additions, and disallowance in the accounts, resulting in incorrect income being shown and the assessee furnishing inaccurate particulars of income in the returns filed.

Analysis:
1. The first issue pertains to the correctness of the Tribunal's decision regarding the penalty imposed on the assessee under section 271(1)(c) of the Income Tax Act. The appellant, represented by Mrs. R. Hemalatha, Senior Standing Counsel, argued that voluntary disclosure by the assessee does not absolve them from penalty proceedings. Reference was made to legal precedents such as Mak Data P. Ltd. vs. Commissioner of Income Tax-II and Sundaram Finance Ltd. vs. Assistant Commissioner of Income-tax. The argument emphasized that even if the assessee disclosed information voluntarily, penalties under section 271(1)(c) could still be imposed. The Court noted that the law prevailing at the time of the Mak Data case supported the appellant's position, indicating a need for interference with the Tribunal's order.

2. The second issue questions whether the Tribunal erred in not making necessary adjustments, additions, and disallowances in the accounts, leading to the incorrect reporting of income by the assessee. The Court examined the Tribunal's reasoning, which considered legal precedents like Hindustan Steel Ltd. vs. State of Orissa and CIT vs. Geetha Ramakrishna Mills P. Ltd. The Tribunal's decision highlighted that penalties for failure to fulfill statutory obligations should only be imposed in cases of deliberate defiance of the law or dishonest conduct. The Court observed that the assessment in question was conducted under Section 143(3) of the Act, where the assessee disclosed advance amounts received during the assessment proceedings. The Tribunal found in favor of the assessee, noting that the CIT(A) rightly deleted the penalty based on factual examination. The Court declined to interfere, emphasizing that the issue was primarily factual, and it was not within their jurisdiction to reevaluate the Tribunal's decision as a third Appellate Authority.

In conclusion, the High Court dismissed the Tax Case Appeal, confirming the Tribunal's order and stating that no questions of law, particularly substantial ones, arose in the appeal. The judgment underscored the importance of factual examination in penalty cases and the limited scope of the Court's jurisdiction in such matters.