2021 (6) TMI 507 - AT - Income Tax

Penalty u/s 271 (1) (c) - under reporting of student fee - discrepancy in the student fee as shown by the assessee in the books of accounts in comparison to the facts and details noted during the survey - HELD THAT - Once the computation of the fee by the Assessing Officer is based on the correct facts then the discrepancy in the fee shown by the assessee in the books would amount to furnishing of inaccurate particulars of income. The explanation of assessee is not supported by any facts or details therefore, the said explanation cannot be regarded as bona-fide or reasonable when it is only to dispute the computation of the consolidated fee received by the assessee. There is no quarrel on the point that as per the explanation 1 to Section 271 (1) (c) the primary onus is on assessee to furnish the explanation which is bona-fide and reasonable and if the Assessing Officer is not satisfied with such explanation the burden is shifted on the Assessing Officer to bring contrary facts or material on record to counter the explanation so furnished by the assessee being not bona-fide. In the case in hand the assessee, though explained the reasons for discrepancy in the fee recorded in the books of accounts however, the actual fee received by the assessee as detected during the survey proceedings is not in dispute therefore, such an explanation for discrepancies without any supporting evidence and proper details cannot be accepted as bona-fide or reasonable. No error or illegality in the impugned order of the CIT (appeals) in sustaining the levy of penalty under Section 271 (1) (c). The same is upheld. - Decided against assessee.

Issues Involved:
1. Legality and correctness of the penalty of ?9,54,952/- imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Confirmation of the penalty by the CIT (Appeals).
3. Estimation of student fee income by the Assessing Officer.
4. Non-consideration of defaults and outstanding amounts in fee payments by the Assessing Officer.
5. Bona fide and reasonableness of the explanation provided by the assessee for discrepancies in fee income.

Detailed Analysis:

1. Legality and Correctness of the Penalty:
The appeal by the assessee challenges the penalty of ?9,54,952/- imposed under Section 271(1)(c) of the Income Tax Act for the assessment year 2007-08. The penalty was levied by the Assessing Officer due to under-reporting of student fees detected during a survey conducted under Section 133A. The assessee argued that the penalty was erroneous and bad in law. However, the Tribunal upheld the penalty, stating that the discrepancy in the fee shown by the assessee amounted to furnishing inaccurate particulars of income.

2. Confirmation of the Penalty by the CIT (Appeals):
The CIT (Appeals) confirmed the penalty imposed by the Assessing Officer. The assessee contended that the confirmation was illegal and the penalty should be cancelled. The Tribunal, however, found no error or illegality in the CIT (Appeals)' decision, thereby sustaining the levy of the penalty.

3. Estimation of Student Fee Income by the Assessing Officer:
The Assessing Officer estimated the student fee income based on the fee receipts for one month and multiplied it by 12 to compute the annual fee. The assessee argued that this estimation did not consider defaults and outstanding amounts from students who left in between. The Tribunal noted that the Assessing Officer's computation was based on undisputed facts detected during the survey, and the number of students and fee per student were not in dispute. Therefore, the estimation was not considered guesswork but a computation based on actual receipts.

4. Non-consideration of Defaults and Outstanding Amounts:
The assessee claimed that the Assessing Officer did not consider defaults and outstanding amounts in fee payments. The Tribunal stated that the assessee did not provide any material evidence to show that certain students had not paid the fee. Non-payment of the fee in time and showing it as outstanding would not affect the total income for the year. The Tribunal concluded that the assessee's explanation lacked supporting evidence and proper details, making it neither bona fide nor reasonable.

5. Bona Fide and Reasonableness of the Explanation:
The Tribunal emphasized that as per Explanation 1 to Section 271(1)(c), the primary onus is on the assessee to furnish a bona fide and reasonable explanation. In this case, the assessee's explanation for the discrepancies in fee income was not supported by any facts or details. The Tribunal distinguished this case from others cited by the assessee, where penalties were not levied due to the nature of the additions or disallowances. Here, the addition was based on undisputed facts detected during the survey, and the explanation provided by the assessee was not accepted as bona fide or reasonable.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the penalty of ?9,54,952/- under Section 271(1)(c) of the Income Tax Act. The order was pronounced in the open Court through video conferencing on 14/06/2021.

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