2014 (11) TMI 510 - HC - Income Tax

Penalty proceedings u/s 271(1)(c) Intention to hide the income or not Held that - The Tribunal rightly made reference to the decision in Sir Shadilal Sugar and General Mills Ltd. V. Commissioner of Income Tax 1987 (7) TMI 3 - SUPREME Court - It is not as if the Commissioner and Tribunal proceeded on the assumption that there was no deliberate attempt on the part of the respondent to conceal the two items - The removal of the word deliberate did not give a free hand to the AO or exposing the assessee to a defence less situation - The principle that runs cutting across any systems of law is that before person is visited with punishment or penalty, the wrongful act on his part must be established - If not a deliberate intention, at least, intention, as such, must be proved to be existing - The intention of this nature may not be equated to the concept of mens rea - At the same time, the minimum contrast with an instance of mere omission, or failure must be made- Otherwise, every inadvertent omission, or a bona fide understanding of a particular provision, which is not accepted by the Income Tax Officer may expose the assessee to penalty - If that time is pursued, Act may turn out to be the one of the collection of penalties than the income tax. Relying upon Mak Data P. Ltd. v. Commissioner of Income Tax 2013 (11) TMI 14 - SUPREME COURT -once an item of income was found to have been concealed, the mere fact that the assessee has voluntarily disclosed it thereafter, does not absolve him from being proceeded u/s 271(1)(c) of the Act - it is important to understand the purport of very word concealment - That can occur, only when the person is in full knowledge of the state of affairs and even while being under obligation to make it known to others, and in particular the authorities under the Act fails or refuses to do so - It is then, and only then, that he can be said to have concealed and once the factum of concealment is proved, his attempt to voluntarily disclose it does not save him as such there was no ingredients of concealment thus, the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
Assessment of income tax return for the year 1994-95, Rectification under Section 154 of the Income Tax Act, Scrutiny of sundry credits, Imposition of penalty under Section 271(1)(c) of the Act, Appeal before Commissioner of Income Tax (Appeals), Appeal before the Income Tax Appellate Tribunal, Interpretation of Section 271 of the Act, Allegation of concealment of income, Judicial precedents on concealment of income, Dismissal of appeal by the High Court.

Assessment of Income Tax Return:
The respondent filed returns for the assessment year 1994-95, showing a loss which was later adjusted by the Assessing Officer under Section 143(1)(a) of the Act. An application for rectification was filed by the respondent, leading to further scrutiny under Section 143(2) of the Act. The correctness of sundry credits was questioned during this process.

Imposition of Penalty:
The Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Act regarding the two disputed amounts. The respondent explained that there was no intention to conceal income, as the amounts were carried forward from the previous year. The Commissioner of Income Tax (Appeals) allowed the appeal, emphasizing the lack of intent to hide income. However, the department appealed to the Income Tax Appellate Tribunal, which dismissed the appeal.

Interpretation of Section 271 of the Act:
The judgment delves into the provisions of Section 271(1)(c) of the Act, emphasizing the burden on the revenue to prove intentional concealment or furnishing of inaccurate particulars by the assessee before levying penalties. The amendment in 1964 removed the word "deliberately," altering the scope of the provision. The judgment highlights that inadvertent mistakes or genuine beliefs cannot be grounds for penalty.

Allegation of Concealment of Income:
The Tribunal and the High Court analyzed the respondent's case, focusing on the absence of deliberate intent to conceal income. The judgment references legal precedents to underscore the importance of proving wrongful acts before imposing penalties, distinguishing between deliberate concealment and inadvertent errors.

Dismissal of Appeal:
The High Court dismissed the appeal, upholding the Tribunal's decision. The judgment emphasizes that the mere existence of discrepancies in income tax returns does not automatically warrant penalties, highlighting the need to establish intentional concealment for penalty imposition.

This detailed analysis of the judgment from the Andhra Pradesh High Court provides insights into the assessment, penalty imposition, legal interpretations, and the ultimate dismissal of the appeal, shedding light on the nuances of income tax law and the burden of proof in penalty cases.