2014 (8) TMI 1248 - HC - Income Tax

Penalty u/s 271(1)(c) - deficit of tax and shortage of cash noticed in survey proceedings - respondent accepted those figures and filed revised returns and offered to pay tax - Certain adjustments were also sought on the basis of the sales that have taken place during the relevant period - respondent stated that it did not have any intention to conceal any source of income and that it accepted the two items pointed out in the course of survey, only with a view to purchase peace. HELD THAT - The exercise to be undertaken by an AO in the proceedings u/s 271(1)(c) is somewhat typical. For all practical purposes, he has to follow a method different from the one, which he adopts while passing the order of assessment. The very fact that a return submitted by the assessee is required to be processed by an Assessing Officer discloses that the facts and figures mentioned in the return are subject to scrutiny and verification. Many a time, the understanding of an assessee about a particular issue may not be correct and the finding of the Assessing Authority on such assessment may result in either adding some additional items of income or disallowing certain deductions. The mere fact that the return filed by an assessee was found to be not acceptable and certain additions of income had to be made or deductions had to be disallowed, may some times give an impression that the assessee was not truthful. That, however, cannot be a ground to brand him as one who has concealed his income from the Department. Before the Act came to be amended in the year 1964, the word 'deliberate' existed in Section 271(c) of the Act. The deletion of that word certainly had changed the complexion of the provision. All the same, it is not to the effect that every discovery of inaccuracy in the facts and figures furnished by an assessee can be treated as concealment per se and thereby, attracting penalty u/s 271(c) - Much would depend upon the facts and circumstances of the concerned case. It is only when the Assessing Officer is able to establish that there was an intention on the part of the assessee to conceal an item of income, though not deliberate, that the occasion to levy penalty would arise. The discussion that was undertaken by the Assessing Authority in the instant case proceeded on the line that once the respondent did not dispute the facts and figures noticed in the survey, it can be inferred that there was a concealment of the corresponding income. It is difficult to accept such a broad proposition. It has already been mentioned that, in his explanation, the respondent stated that though he had explanation for the facts alleged against him, he did not choose to press the same into service, lest there be any friction with the Department. That, however, was treated almost as a total surrender by the respondent. The readiness on the part of the assessee to accept the facts and figures noticed in the survey, with the objective of avoiding further complication in the matter or to purchase peace, cannot be treated as unconditional acceptance of the allegation or accusation against him much less does it basis for levy of penalty. If every variation that is noticed in the course of assessment is to be treated as concealment, the very computation of the income tax and the exercise to be undertaken thereunder, undergoes substantial change, which the Parliament may not have intended. At any rate, the Commissioner was convinced on the facts that there was no act on the part of the respondent. It is only when the conclusions at the level of the Commissioner who happens to be the last authority on the facts are shown to be perverse or without any basis, that an occasion would arise for the Tribunal or for that mater, this Court to interfere with the same. Decided against revenue.

Summary

Issues:
1. Appeal against Income Tax Appellate Tribunal order
2. Assessment year 1994-95 discrepancies and penalty under Section 271(1)(c) of the Income Tax Act
3. Appeal before Commissioner of Appeals and further appeal before Tribunal
4. Discrepancies in stock and cash, explanation by respondent, and imposition of penalty
5. Interpretation of Section 271(1)(c) and intention to conceal income
6. Assessing Officer's role in penalty proceedings and burden of proof
7. Factors determining concealment of income and relevance of nature of activity

Analysis:
1. The appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal for the assessment year 1994-95. The respondent, a manufacturer, underwent a survey revealing a deficit of tax and cash. The respondent accepted the discrepancies and filed revised returns. An additional income was added to the assessment, leading to penalty proceedings under Section 271(1)(c) of the Act.

2. The Assessing Officer initiated penalty proceedings against the respondent for discrepancies discovered during the survey. The respondent claimed no intention to conceal income, attributing the discrepancies to the nature of the business and accepting the figures to avoid conflict. The Commissioner of Appeals allowed the appeal, finding no intent to conceal income. The Tribunal upheld this decision, emphasizing the importance of relevant precedents.

3. The appellant argued that the discrepancies were only included in the assessment due to the survey, indicating an intention to conceal income. The respondent contended that the discrepancies were based on projections, not physical findings, and were accepted to avoid complications. The Assessing Officer imposed a penalty, considering the acceptance as concealment.

4. The Assessing Officer's role in penalty proceedings under Section 271(1)(c) requires a different approach than assessment. The law postulates that not every inaccuracy amounts to concealment, emphasizing the need to establish intent. The burden of proof lies with the revenue to show deliberate concealment of income.

5. The discussion focused on whether the respondent's acceptance of discrepancies amounted to concealment. Factors such as the nature of the activity, previous conduct, and circumstances of discovery are crucial in determining concealment. Merely accepting discrepancies to avoid conflict does not automatically imply concealment.

6. The Tribunal dismissed the appeal, upholding the Commissioner's decision that there was no concealment of income. The readiness to accept discrepancies for peace does not justify penalty imposition. The decision of the Commissioner, being the final authority on facts, stands unless shown to be baseless or perverse, warranting interference.

7. In conclusion, the Tribunal upheld the decision, emphasizing that not every discrepancy implies concealment. The appeal was dismissed, with no costs awarded, and any related petitions were disposed of accordingly.