2005 (2) TMI 475 - AT - Income Tax

Explanation of the assessee is not found to be plausible - Impose penalty levied u/s 271(1)(c) - concealment of income or filing of inaccurate particulars of income - HELD THAT - A careful perusal of the impugned orders clarify that although the assessee has surrendered these amounts during the course of survey, but the same were not reflected in the ensuing returns of income. The explanations tendered were not accepted by the learned AO. So, non-acceptance of the explanation of the assessee, and mere non-filing of appeal against the impugned additions, do not ipso facto lead to the finding that the assessee had concealed the income. There may be hundred and one reasons for such action of surrender of the assessee. Something more is required under the penalty proceeding to nail the assessee for concealment of income or of filing of inaccurate particulars of income. This aspect is missing from the penalty order. The parameters for penal proceedings are entirely different from making addition in quantum of income declared. When the additions are made on estimation, no penalty can be levied. When explanation of the assessee is not found to be plausible and hence rejected, this is again not a just reason to levy penalty u/s 271(1)(c) of the Act. Consequently, penalty u/s 271(1)(c) is not leviable in this case. I draw support from the abovementioned decisions. In the result, the appeal is allowed and the penalty is set aside.

Summary

Issues:
Penalty levied under section 271(1)(c) of the IT Act, 1961 for assessment year 1997-98.

Analysis:
The appeal before the Appellate Tribunal ITAT Jodhpur arose from a penalty imposed under section 271(1)(c) of the IT Act. The penalty was based on various additions made during the assessment, including unexplained investments, unexplained cash, and income from sales. The total penalty amount imposed was Rs. 19,012, which was confirmed by the CIT(A) and challenged by the assessee in this appeal.

The main argument presented by the assessee was that the additions made in the assessment order were either based on estimation or could not have been made as per the provisions of the law. The assessee contended that the trading additions were made based on sales estimation without proper justification, and the cash balance discrepancy was not valid as there was no actual discrepancy found. Additionally, the investment in Sahara India Corporation was explained to be related to earlier years and was voluntarily disclosed by the assessee to avoid penalty action.

The Appellate Tribunal noted that the mere fact that the assessee had agreed to certain additions during the assessment did not automatically imply concealment of income. The tribunal emphasized the need for the revenue to prove the mens rea of a quasi-criminal offense for penalty imposition. The tribunal also highlighted that surrendering income during survey proceedings does not automatically warrant a penalty, especially when reasonable explanations were provided by the assessee.

Ultimately, the tribunal found that the explanations provided by the assessee were not accepted by the assessing officer, but there was no evidence of concealment of income or filing inaccurate particulars. The tribunal concluded that the parameters for penalty proceedings differ from making additions to the declared income, and in this case, the penalty under section 271(1)(c) was deemed not leviable. The tribunal allowed the appeal and set aside the penalty imposed on the assessee.