2013 (11) TMI 528 - HC - Income Tax

Penalty imposed u/s 271(1) - Power of reduce or waive penalty u/s 273A - concealment of income - disclosure voluntary or not Held that - On the facts and circumstances projected by Commissioner of Income Tax (Appeals), it was not only a case of furnishing of inaccurate particulars in earlier assessments but is also a case of concealment of income which thus had escaped assessment. Sequelly, even when strict compliance in terms of Commissioner of Income Tax, Ahmedabad v. Reliance Petroproducts Private Limited, 2010 (3) TMI 80 - SUPREME COURT sought by the assessee is made of the provisions of Section 271(1)(c) of the Act, it is clearly a case of concealment of income and by no means can be said to be a disclosure made voluntarily or bona fide. Regarding waiver of penalty u/s 273A - Held that - Entire exercise by the assessee was preceded by search and seizure operations resulting in seizure of books of account of the assessee which had positively suggested concealment of income which had earlier escaped assessment. It has already been noticed in this context that proceedings for escapement, viz, under Section 148 of the Act had been initiated against the assessee. Chain of events and concomitant conduct of the assessee is a clear indicator that there was complete absence of good faith and when the the assessee was placed in a very tight and rather vulnerable position, only then additional income had been disclosed. - Tribunal was wrong in cancelling the penalty imposed on the assessee under Section 271(1)(c) of the Income Tax Act, 1961. Decided in favor of Revenue.

Summary

Issues Involved:
1. Legality of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of the assessee's claim for waiver of penalty under Section 273 of the Income Tax Act, 1961.
3. Evaluation of the assessee's claim of genuine hardship.

Issue-wise Detailed Analysis:

1. Legality of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961:
The primary question referred for the Court's opinion was whether the Tribunal was right in cancelling the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The Court evaluated the facts and circumstances, noting that the assessee had furnished inaccurate particulars of income for five consecutive assessment years (1982-83 to 1986-87). The Court found that this was not an innocuous omission but a deliberate act of concealment. The Court dismissed the assessee's reliance on the case of Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai and another, stating that the element of mens-rea was clearly present. The Court concluded that the revised returns filed by the assessee were not voluntary but were a reaction to the search and seizure operations and the subsequent notices under Section 148 of the Act. Therefore, the Tribunal's cancellation of the penalty was incorrect, and the penalty imposed by the Assessing Officer was justified.

2. Validity of the assessee's claim for waiver of penalty under Section 273 of the Income Tax Act, 1961:
The assessee had sought waiver of the penalty on the grounds of voluntary disclosure and no detection by the revenue. However, the Court found that the disclosure was not voluntary but was made only after the assessee was cornered by the search and seizure operations. The Commissioner of Income Tax (Appeals) had also noted that the additional income disclosed was not voluntary or bona fide. The Court emphasized that for a waiver under Section 273, the disclosure must be voluntary, in good faith, and the assessee must extend cooperation to the tax authorities. Since these conditions were not met, the Court upheld the decision of the Central Board of Direct Taxes (CBDT) and the Commissioner of Income Tax (Central), Ludhiana, to deny the waiver.

3. Evaluation of the assessee's claim of genuine hardship:
The assessee claimed genuine hardship due to the penalty imposed. However, the Commissioner of Income Tax (Central), Ludhiana, after evaluating the financial position of the assessee and its partners, concluded that the payment of penalties would not cause ruination to the assessee's business. The Court agreed with this assessment, noting that the firm and its partners had sufficient assets to pay the penalties. The Court also dismissed the assessee's reference to the case of Jaswant Rai and another v. Central Board of Direct Taxes and Revenue and others, stating that the facts were different as it was not a case of voluntary disclosure scheme but one of search and seizure. Consequently, the Court found no merit in the claim of genuine hardship.

Conclusion:
The Court held that the Tribunal was wrong in cancelling the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The references were answered in favor of the revenue and against the assessee. The writ petition filed by the assessee was dismissed, and the penalty imposed by the Assessing Officer was upheld.