2010 (8) TMI 75 - HC - Income Tax

Penalty - Concealment of Income - Whether the Tribunal was correct in law in deleting the penalty imposed by the Income-tax Officer under section 271(1)(c) of the Income-tax Act, 1961 ? Held that - the reason given by the Tribunal for quashing the penalty proceedings were irrelevant, not germane to the issue and the Tribunal had lost sight of aspects which had been conclusively established in the quantum proceedings. The object behind the enactment of section 271(1)(c) read with Explanations indicates that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provisions is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under section 276C of the Income-tax Act. Thus, answer the question as formulated in the negative that is against the assessee and in favour of the Revenue.

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961 for concealment of income in assessment year 1979-80.

Analysis:
1. The judgment delivered by A. K. Sikri J. pertains to a case where the Assessing Officer imposed a penalty on the assessee for concealing income in the assessment year 1979-80 under section 271(1)(c) of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) upheld the penalty, but the Income-tax Appellate Tribunal set it aside. The Revenue then approached the High Court seeking reference under section 256(2) of the Act. The Tribunal was directed to refer the question of law regarding the deletion of penalty to the High Court.

2. The Assessing Officer disallowed the claim of payment of commission to Mrs. Ritu Nanda, finding it to be unsubstantiated. The penalty was imposed after the assessee failed to provide a satisfactory explanation. The Commissioner of Income-tax (Appeals) partially disallowed the commission claim, while the Tribunal completely set aside the penalty. The Tribunal's decision was based on the fact that Mrs. Ritu Nanda did not render any services for the commission paid, which was further supported by the findings of the Commissioner and the Tribunal in the quantum proceedings.

3. The High Court observed that the Tribunal erred in quashing the penalty proceedings. The Tribunal's reasoning that the claim for commission was not bogus but excessive was deemed irrelevant. The High Court emphasized that the penalty was imposed due to the bogus claim of commission, not its excessiveness. The Tribunal's view that the Assessing Officer should not interfere with the assessee's business decisions was criticized, as the claim was found to be false and unsubstantiated.

4. Referring to legal precedents, the High Court highlighted that penalty for concealment or furnishing inaccurate particulars can be imposed even if the facts are disclosed but the claim made is ex facie bogus. The court cited cases where claims like bogus hundi loans or sales attracted penalty. The court also emphasized the strict liability of the assessee for concealment or inaccurate particulars under section 271(1)(c) of the Income-tax Act.

5. In conclusion, the High Court answered the question against the assessee and in favor of the Revenue, upholding the imposition of the penalty under section 271(1)(c) for concealing income in the assessment year 1979-80.