2024 (12) TMI 983 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - assessee has received substantial contract receipts - HELD THAT - It is evident from the record that the assessee neither filed its return of income u/s 139 nor filed its return of income in response to notice issued under section 148. It is also evident from the record that the notice under section 148 of the Act and other statutory notices were issued beyond the time period specified u/s 153(1). AO on the basis of the information received from the ITD systems and NMS portal was satisfied that the assessee has received substantial contract receipts amounting to Rs. 2.5 crore, during the year under consideration. Therefore, on a plain application of the provisions of Explanation 3 to section 271(1)(c) of the Act, the present case clearly falls in the category of concealment of particulars of income for the purpose of section 271(1)(c) of the Act. Thus, we find merits in the findings of the learned CIT(A), in rejecting the contention of the assessee that no penalty can be levied in the present case as the addition has been made purely on an estimated basis. As evident from the record, the assessee has been in complete defiance of various statutory requirements and also did not furnish the details as called for during the assessment proceedings. Thus, when necessary data, at least the income tax return, has not been filed by the assessee, despite opportunity even pursuant to notice issued under section 148 of the Act, the assessee cannot now take the plea that since the addition has been made by applying the net profit rate, no penalty can be levied in its case. Therefore, we are of the considered view that the decisions relied upon by the learned AR in support of the aforesaid plea are completely distinguishable on facts and thus, not applicable to the present case. Insofar as the contention of the learned AR that the assessee could not file the return of income due to failure on the part of its auditor, it is pertinent to note that under the provisions of section 139 of the Act, it is the responsibility of the assessee to file its return of income within the due date and same cannot be compared to the filing of audit report under section 44AB of the Act, which specifically requires the accounts to be audited by an accountant and furnishing of such audit report in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. Thus, we are of the considered view that even if due to the failure on the part of the auditor the assessee failed to file its audit report, as required under section 44AB of the Act, the same does not absolve the assessee from its responsibility to file the return of income under section 139 of the Act. At this stage, it is also pertinent to reiterate that the assessee also failed to file its return of income in pursuance of notice dated 30/03/2018 issued under section 148 of the Act. Thus, when the assessee has failed to comply with its statutory requirements under section 139 of the Act and also has completely ignored the notice issued under section 148 of the Act, the assessee now cannot shift its responsibility to its auditor. Accordingly, we find no merits in the aforesaid plea made on behalf of the assessee and the reliance placed on the decision of the coordinate bench rendered in assessee s own case is completely misplaced. AO correctly levied a penalty under section 271(1)(c) of the Act in the present case and the same has been rightly upheld by the learned CIT(A). Decided against assessee.

Issues Involved:

1. Levy of penalty under section 271(1)(c) of the Income Tax Act for concealment of income.
2. Procedural fairness and opportunity to be heard.
3. Estimation basis for income addition and its impact on penalty.
4. Responsibility for filing tax returns and audit reports.
5. Applicability of case laws and precedents.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):

The primary issue revolves around the penalty imposed under section 271(1)(c) of the Income Tax Act for concealing income. The assessee failed to file a return of income despite receiving substantial contract receipts and professional fees. The Assessing Officer (AO) initiated proceedings under section 147 and issued a notice under section 148, but the assessee did not comply by filing the return. Consequently, the AO assessed the total income and levied a penalty for under-reporting income. The CIT(A) upheld this penalty, emphasizing that the assessee neither filed the return under section 139 nor responded to the notice under section 148, thus constituting concealment of income.

2. Procedural Fairness and Opportunity to be Heard:

The assessee contended that the penalty was levied without a reasonable opportunity to present its case and that the order was passed ex-parte. The Tribunal noted that despite notices and opportunities provided during the assessment proceedings, the assessee failed to furnish necessary details and documents, thereby justifying the actions of the AO and CIT(A).

3. Estimation Basis for Income Addition:

The assessee argued that the penalty should not be levied as the income addition was made on an estimated basis. The Tribunal rejected this argument, clarifying that such a proposition applies when minor defects are noticed in a filed return, not when no return is filed despite significant business receipts. The Tribunal emphasized that the estimation was necessary due to the absence of proper documentation and compliance from the assessee.

4. Responsibility for Filing Tax Returns and Audit Reports:

The assessee attributed the failure to file returns to its auditor's negligence. The Tribunal highlighted that under section 139, it is the assessee's responsibility to file returns, independent of the auditor's obligations under section 44AB regarding audit reports. The Tribunal found no merit in the argument that the auditor's failure absolved the assessee from its statutory duties.

5. Applicability of Case Laws and Precedents:

The assessee cited various case laws to argue against the penalty. However, the Tribunal found these cases distinguishable, as they involved situations where returns were filed, and minor defects led to estimations. In contrast, the present case involved a complete failure to file returns or substantiate expenses, justifying the penalty under Explanation 3 to section 271(1)(c), which deems failure to file returns as concealment.

Conclusion:

The Tribunal upheld the penalty imposed by the AO and CIT(A), finding that the assessee's actions fell squarely within the ambit of concealment under section 271(1)(c). The appeal was dismissed, reinforcing the importance of compliance with statutory requirements and the responsibilities of taxpayers in filing returns and substantiating claims.

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