2015 (3) TMI 574 - HC - Income Tax

Penalty under Section 271 (1)(c) - non declaration of any profit/ short term capital gain on the sale of Dal Mill by treating that as a long term capital gain - claim of the assessee was a debatable one and there was no specific finding that the assessee had submitted false or incorrect accounts - Held that - In the case in hand, it is not in dispute that the assessee disclosed all details about its income including the fact about sale of Dal Mill with a consideration of ₹ 19,14,000/- A depreciation was claimed by it by treating the same as a depreciable asset. The written down value too was referred but the error crept in treating the transaction as long term capital gain. The assessee committed the error in present set of facts and that cannot be treated as concealment of particulars of its income or furnishing inaccurate particulars of income. The error could have been rectified by the Assessing Officer by making necessary additions and for that the assessee is under obligation to pay tax but penalty could have not been imposed as per Section 271(a)(c) of the Act without satisfying concealment or submission of inaccurate particulars of income on the part of the assessee. Such satisfaction must reflect in the order of assessment as the penalty as per the provision under consideration is not automatic. Such a penalty must not be imposed ipse dixit. We are of the considered opinion that in the case in hand the powers under Section 271 (a)(c) of the Act of 1961 were erroneously exercised. - Decided in favour of assessee.

Summary

Issues:
- Interpretation of Section 271(1)(c) of the Income Tax Act, 1961 regarding penalty imposition for concealment of income or furnishing inaccurate particulars.
- Assessment of whether the appellant-assessee concealed income or submitted inaccurate particulars in the case of selling a Dal Mill as long-term capital gain without declaring profit.

Analysis:
The primary issue in this case revolves around the interpretation and application of Section 271(1)(c) of the Income Tax Act, 1961, concerning the imposition of penalties for concealing income or providing inaccurate particulars. The appellant-assessee sold a Dal Mill but did not declare any profit or short-term capital gain, treating it as a long-term capital gain. The Assessing Officer initiated action under Section 147 read with Section 148 due to discrepancies in the return filed. The additions made by the Assessing Officer were affirmed by the Commissioner of Income Tax and the Income Tax Appellate Tribunal.

The appellant contended that there was no concealment or submission of inaccurate particulars of income as all necessary details about the sale of the Dal Mill were disclosed in the return, including depreciation claimed. The appellant argued that any difference of opinion should result in necessary additions by the Assessing Officer, not penalties. On the other hand, the Revenue argued that the appellant failed to justify the basis for claiming depreciation, justifying the penalty imposition.

The Court analyzed the provisions of Section 271(1)(c) and emphasized that penalties are applicable when there is concealment of income or submission of inaccurate particulars. In this case, the appellant disclosed all income details, including the sale of the Dal Mill and depreciation claimed. The error made by treating the transaction as long-term capital gain was not deliberate concealment but a mistake. The Court concluded that penalties should not be imposed without clear evidence of concealment or inaccurate particulars, which must reflect in the assessment order.

Ultimately, the Court held that the Income Tax Appellate Tribunal was not justified in confirming the penalty imposed on the appellant-assessee under Section 271(1)(c) as the claim was debatable, and there was no specific finding of false or incorrect accounts submitted. Consequently, the orders imposing penalties by the Assessing Officer, Commissioner of Income Tax, and the Tribunal were quashed.

This judgment clarifies the stringent requirements for imposing penalties under Section 271(1)(c) of the Income Tax Act, emphasizing the need for clear evidence of deliberate concealment or submission of inaccurate particulars to justify penalties.