2013 (11) TMI 840 - HC - Income Tax

Addition u/s 69 and penalty u/s 271(1)(c) of the Income tax Act Held that - The revised return had been acted upon by the Assessing Authority and in fact, the loss of Rs. 13,87,540/- declared by the assessee in the revised return filed on 24.3.1992, had been accepted in toto. The bonafide of the assessee is therefore established because it was not able to produce the necessary documentary evidence for proving the capacity of the shareholders and depositors to the full extent within a short span of time as the assessment was getting barred by limitation. Even the depreciation of Rs. 24,62,390/- claimed in the revised return, had been accepted by the Assessing Officer. The share capital and the unsecured loans amounting to Rs. 12,23,100/- declared by the assessee in the revised return has also been accepted. Moreover, decision of Hon ble Supreme Court in the case of Commissioner of Income Tax vs. Stellar Investments Ltd. 2000 (7) TMI 76 - SUPREME Court and CIT vs. Lovely Exports (P) Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA , the subscription made by the various shareholders in the share capital of a company cannot be taxed at the hand of the company and can only be taxed at the hands of the shareholder under Section 69 of the Act. Failure of the assessee in proving the capacity of the various shareholders to invest in the share capital, could not have been a ground for initiating penalty proceedings Deleted the penalty u/s 271(1)(c) of the Income tax act Decided against the Revenue.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was legally correct in directing the Assessing Officer to delete the penalty under section 271(1)(c) of the Income Tax Act, 1961 and refund the amount of penalty, if any collected?
2. Whether the Income Tax Appellate Tribunal was legally correct in concluding that the Assessing Officer had accepted the assessee's request for non-levy of penalty under section 271(1)(c) of the Income Tax Act, 1961?
3. Whether the Income Tax Appellate Tribunal was legally correct in holding that a revised return of income was filed by the assessee after entering into an agreement with the Assessing Officer, and thus, there was no concealment of income for which penalty could be imposed?

Analysis:
1. The appeal under Section 260(A) of the Income Tax Act, 1961 was filed against the order of the Income Tax Appellate Tribunal directing the Assessing Officer to delete the penalty under section 271(1)(c) and refund any collected amount. The Tribunal found that the revised return filed by the assessee was acted upon by the Assessing Authority, and the declared loss was accepted. The Tribunal concluded that there was no concealment of income justifying the penalty. The Tribunal relied on the Delhi High Court judgment and directed the deletion of the penalty, emphasizing the absence of concealment based on the circumstances and case law.

2. The Tribunal's decision was based on the acceptance of the revised return by the Assessing Officer and the circumstances surrounding the filing of the return. The Tribunal noted that the Assessing Officer had allowed the claim of depreciation and accepted the surrendered amount, indicating a possible agreement between the assessee and the Officer. The Tribunal held that this agreement negated any grounds for imposing a penalty for concealment. The Tribunal's decision was supported by the facts and legal precedents cited during the proceedings.

3. The Tribunal further considered the bonafide nature of the assessee's actions, particularly in light of the difficulties faced in producing necessary documentary evidence within the limited timeframe during assessment proceedings. The Tribunal referenced Supreme Court decisions regarding the taxation of shareholder subscriptions and concluded that the failure to prove the capacity of shareholders did not warrant penalty proceedings. The Tribunal found that the circumstances established the bonafide intent of the assessee and upheld the deletion of the penalty.

In summary, the High Court upheld the Tribunal's decision to delete the penalty under section 271(1)(c) of the Income Tax Act, 1961 based on the acceptance of the revised return, absence of concealment, and the bonafide actions of the assessee in the given circumstances. The legal analysis considered the factual and legal aspects of the case, ensuring compliance with relevant provisions and precedents.