2006 (2) TMI 89 - HC - Income Tax

Levy of penalty under section 271(1)(c) - Whether Tribunal has any material to hold that the assessee in filing the revised return of income has not acted bona fide? and Whether Tribunal was correct in holding that the levy of penalty is justifiable merely for the reason that no reasons were furnished by the assessee for filing an upward revision of income in the revised return of income? - We find no reason to interfere with the order of the Tribunal

Summary

Issues Involved:
1. Sustaining the levy of penalty under section 271(1)(c) of the Income-tax Act.
2. Whether the assessee acted bona fide in filing the revised return of income.
3. Justifiability of the levy of penalty due to the absence of reasons for filing an upward revision of income in the revised return.

Detailed Analysis:

Issue 1: Sustaining the Levy of Penalty under Section 271(1)(c) of the Income-tax Act
The Tribunal upheld the penalty under section 271(1)(c), which deals with the concealment of income or furnishing inaccurate particulars. The court examined the legislative provisions and judicial precedents, including the Indian Income-tax Act, 1922 (section 28), and the Income-tax Act, 1961 (section 271), to determine the validity of the penalty. The court referred to the apex court's decision in CIT v. S.V. Angidi Chettiar [1962] 44 ITR 739, which held that satisfaction for penalty must be recorded during assessment proceedings. The Delhi High Court's decisions in CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 and Diwan Enterprises v. CIT [2000] 246 ITR 571 were discussed but not followed, as they were based on a misinterpretation of the apex court's ruling. The court concluded that the indication in the assessment order that penalty proceedings were initiated separately was sufficient to demonstrate the Assessing Officer's satisfaction regarding the concealment of income. The court also noted that the acceptance of a revised return does not preclude penalty proceedings if the original return was found to be inaccurate or misleading. The question of law was answered in favor of the Revenue.

Issue 2: Whether the Assessee Acted Bona Fide in Filing the Revised Return of Income
The Tribunal found that the assessee did not act bona fide in filing the revised return. The court examined whether the revised return was filed voluntarily or under compulsion. The Tribunal concluded that the assessee's original return was not accurate, and the revised return was filed only after the Assessing Officer issued a notice under section 143(2). The court referred to various precedents, including the Full Bench decision in A. Rm. A.L.A. Arunachalam Chettyar v. CIT [1931] 6 ITC 58 and the Bombay High Court's ruling in Dayabhai Girdharbhai v. CIT [1957] 32 ITR 677, which held that a revised return filed after detection of inaccuracies in the original return does not absolve the assessee from penalty. The court upheld the Tribunal's finding that the assessee's act was not bona fide. The question of law was answered against the assessee.

Issue 3: Justifiability of the Levy of Penalty Due to the Absence of Reasons for Filing an Upward Revision of Income in the Revised Return
The Tribunal justified the penalty on the grounds that the assessee failed to provide reasons for the upward revision of income in the revised return. The court noted that the revised return was filed only after the Assessing Officer initiated proceedings under section 143(2). The court referred to the apex court's decision in K.P. Madhusudhanan v. CIT [2001] 251 ITR 99, which clarified that the deletion of the word "deliberately" from section 271(1)(c) made the provision more stringent. The court also cited the decision in CIT v. C. Ananthan Chettiar [2005] 273 ITR 401, which held that the absence of a valid explanation for the revised return justifies the imposition of a penalty. The Tribunal's finding that the levy of penalty was justified was upheld. The question of law was answered against the assessee.

The court concluded that the Tribunal's findings were based on a thorough examination of the facts and applicable laws, and there was no reason to interfere with the Tribunal's decision. All questions of law were answered in favor of the Revenue, and the penalty under section 271(1)(c) was upheld.