2006 (7) TMI 148 - HC - Income Tax

Penalty under section 271(1)(c) - assessee had consciously concealed the particulars of income. - Assessing Officer has proceeded on the basis of the materials unearthed during the search. Reply given by the assessee as well as by the lawyer would clearly show that there was no objection regarding the estimation of the assessment made by the Assessing Officer. The only request was to make some adjustment and to waive the penalty which was not acceptable to the Assessing Officer. We are of the view that the Tribunal has committed a grave error in holding that there is no positive finding that the assessee had concealed income. The facts would show otherwise. In such circumstances, we find it difficult to sustain the order of the Tribunal.- tribunal was not justified in holding that penalty proceedings could not be initiated.

Summary

Issues:
1. Justification of Tribunal's interference with penalty imposition under section 271(1)(c) of the Income-tax Act.

Analysis:
1. The case involved an appeal by the Commissioner of Income-tax against the Income-tax Appellate Tribunal's order regarding the imposition of a penalty under section 271(1)(c) of the Income-tax Act. The Tribunal had interfered with the penalty proceedings based on the decision in Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705.

2. The assessee initially declared income from liquor business as Rs. 40,000 on an estimate basis but later agreed to adopt Rs. 3,45,643 as income after a search was conducted in the premises. The Assessing Officer initiated penalty proceedings under section 271(1)(c) despite the assessee's request for no penalty. The Commissioner of Income-tax (Appeals) upheld the penalty, leading the assessee to appeal to the Income-tax Appellate Tribunal.

3. The Tribunal, considering precedents like CIT v. Adamklum [1997] 223 ITR 264 and Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705, held that penalty initiation lacked reasonable grounds. The Revenue appealed the Tribunal's decision, arguing that the Tribunal misinterpreted section 271(1)(c) and referred to relevant case laws to support their stance.

4. The assessee's counsel argued that the Tribunal's decision should stand, emphasizing the acceptance of the proposal to estimate income from liquor business and the request to waive the penalty. Case laws like CIT v. Sarda Rice and Oil Mills [1979] 117 ITR 917 were cited to support the assessee's position.

5. The High Court analyzed the case in light of legal precedents such as CIT v. K. P. Madhusudanan [2000] 246 ITR 218 and affirmed by the apex court. The court found that the Tribunal erred in its decision, as the facts indicated the assessee's conscious concealment of income, leading to the restoration of the Assistant Commissioner's penalty order under section 271(1)(c) of the Act. The court highlighted that penalty imposition does not rely on the assessee's consent and upheld the penalty based on the evidence of income concealment.

6. The High Court concluded that the Tribunal's decision was erroneous, as the facts supported the imposition of the penalty under section 271(1)(c) by the Assistant Commissioner of Income-tax. The court set aside the Tribunal's order and restored the penalty imposed by the Assessing Officer, emphasizing the legal principle that penalty proceedings are independent of the assessee's agreement or concession, focusing on the objective evidence of income concealment.