2015 (8) TMI 325 - AT - Income Tax

Penalty u/s 271(1)(c) - AO observed that since assessee has earned income which he should have declared in the return of income, but, did not do so, he is liable to be visited with penalty u/s 271(1)(c) in view of explanation 1 and 5A of section 271(1)(c) - assessee in the application made before the Settlement Commission had offered additional income - Held that - there is nothing in assessment order to suggest that additional income assessed at the hands of assessee is as a result of any incriminating material. Neither at the stage of assessment nor at the time of penalty proceeding, AO has brought any material on record to show that additional income really belongs to assessee. Only because assessee offered additional income at his hand that will not automatically lead to the conclusion that assessee has concealed his income or furnished inaccurate particulars of income. For imposing penalty u/s 271(1)(c), AO has to prove the fact of concealment by virtue of willful negligence or deliberate act by assessee. One more aspect which needs deliberation is, though in the penalty order, AO has in clear terms mentioned that imposition of penalty is for concealment of income and not furnishing of inaccurate particulars of income, but, ld. CIT(A) has observed that assessee has furnished inaccurate particulars of income. From the aforesaid facts, it is clear that the departmental authorities are not sure as to which limb of the penalty provision is attracted. Therefore, considering the totality of facts and circumstances and keeping in view, the observations made by Settlement Commission, we are of the opinion that since no conclusive finding or material has been brought on record to prove either concealment of income or furnishing of inaccurate particulars of income, imposition of penalty in the facts and circumstances of the present case is not justified. As far as the decisions relied upon by learned D.R. are concerned, though we fully agree with the principles laid down therein, however, they cannot be applied uniformly to all cases divorced from the facts on the basis of which such principle are decided. After careful analysis of the decisions, we are of the view that they will not apply to the facts of the present case. In aforesaid view of the matter, we are of the opinion that imposition of penalty under section 271(1)(c) in the facts of the present case is not justified. Accordingly, we delete the same. - Decided in favour of assessee.

Issues Involved:
1. Imposition of penalty under section 271(1)(c) for AYs 2005-06 to 2009-10.
2. Alleged concealment of income and furnishing of inaccurate particulars of income.
3. Validity of additional income offered before the Settlement Commission.
4. Determination of the true owner of the unaccounted income.

Issue-wise Detailed Analysis:

1. Imposition of penalty under section 271(1)(c) for AYs 2005-06 to 2009-10:
The appeals were directed against the common order dated 09/12/2013 of the CIT(A)-I, Hyderabad, which confirmed the penalty imposed under section 271(1)(c) for the assessment years 2005-06 to 2009-10. The facts and issues were common across these appeals, and they were clubbed and heard together for convenience.

2. Alleged concealment of income and furnishing of inaccurate particulars of income:
The assessee, who worked as a Manager in JB Education Society, was subjected to a search and seizure operation under section 132 of the Act. Notices under section 153A were issued, and the assessee filed returns declaring the same income as in the original returns. During the assessment, the AO found that the assessee had moved an application before the Settlement Commission, admitting to collecting excess fees as income and offering to disclose it. The AO completed the assessment based on this disclosure and imposed penalties under section 271(1)(c) for furnishing inaccurate particulars of income/concealment of income.

3. Validity of additional income offered before the Settlement Commission:
The assessee argued that the additional income was offered during the search and seizure operation and declared in the application before the Settlement Commission, with taxes paid. The Settlement Commission, however, rejected the application, stating the unaccounted income disclosed did not pertain to the assessee. The CIT(A) upheld the penalties, noting the assessee's affidavit admitting the excess fees as his income, leading to the Tribunal's decision that the income could not be added to the educational institutions' hands.

4. Determination of the true owner of the unaccounted income:
The Tribunal observed that the AO relied solely on the declaration made before the Settlement Commission without any other incriminating material. The CIT(A) supported the penalty imposition, citing collusion between the assessee and the management. However, the Settlement Commission found no material indicating the assessee embezzled funds, leading to a conflict of opinion on the income's ownership. The Tribunal noted that the same income could not be assessed in more than one hand and that there was no conclusive evidence proving the additional income belonged to the assessee.

Conclusion:
The Tribunal concluded that the imposition of penalty under section 271(1)(c) was not justified, as there was no conclusive finding or material proving concealment of income or furnishing of inaccurate particulars. The departmental authorities were unsure about the income's true owner, and the penalty provisions' specific limb was unclear. The Tribunal deleted the penalties for all appeals under consideration, as the facts and materials were materially identical across the assessment years.

Final Order:
All appeals were allowed, and the penalties imposed under section 271(1)(c) were deleted. The judgment was pronounced in the open court on 19.06.2015.

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