2006 (2) TMI 105 - HC - Income Tax

Penalty u/s 271(1)(c) - Whether on the facts and circumstances of the case and in law the Tribunal was right in deleting the penalty levied under section 271(1)(c) by the Assessing Officer even though the assessee is engaged in the contract business of material handling and is a private limited company for not showing the amount of work uncertified in the credit side of the profit and loss account and thereby not furnishing accurate particulars of its income in the original return of income filed by it and the assessee filed revised return only when it was pointed out by the Assessing Officer though under law the assessee was duty-bound to do that and to pay tax accordingly? - Question is answered in the affirmative i.e. in favour of the assessee and against the Revenue

Summary

Issues:
Penalty under section 271(1)(c) for not showing work uncertified in profit and loss account accurately.

Detailed Analysis:
The case involved a question referred by the Income-tax Appellate Tribunal regarding the deletion of penalty under section 271(1)(c) by the Assessing Officer. The Tribunal noted that the original return of income did not include work-in-progress or work uncertified, leading to the revised return showing a higher income. The Assessing Officer accepted errors in the return and assessed the income accordingly. However, during penalty proceedings, the penalty amount was disputed, leading to modifications by the Commissioner of Income-tax (Appeals). The Tribunal found that the discrepancies in income were due to errors in accounting and not intentional concealment. It was observed that the assessee had consistently followed a specific accounting method accepted by the Department, which did not reflect any intention to conceal income or provide inaccurate particulars.

The Tribunal highlighted that the difference between the returned income and the assessed income was minimal, indicating unintentional errors rather than deliberate concealment. The Tribunal emphasized that the accounting method adopted by the assessee, which did not include work-in-progress, was consistently applied and accepted by the Department in previous assessments. Therefore, the Tribunal concluded that there was no evidence of systematic tax evasion or intentional concealment of income. It was established that the assessee's belief regarding the treatment of uncertified work-in-progress was genuine and not aimed at evading tax liability.

The High Court upheld the Tribunal's findings, stating that the assessee's accounting method was legitimate and had been accepted by the Department in previous years. The Court emphasized the absence of evidence to challenge the Tribunal's factual findings, leading to the rejection of the Revenue's contention. The Court affirmed that the assessee acted in good faith and was justified in believing that the uncertified work-in-progress was not taxable. Consequently, the Court ruled in favor of the assessee, concluding that the penalty under section 271(1)(c) was not applicable in this case.

In conclusion, the High Court disposed of the reference, ruling in favor of the assessee and against the Revenue. The Court highlighted the importance of considering the facts and circumstances of each case to determine the applicability of penalties under the Income-tax Act.