2015 (11) TMI 930 - HC - Income Tax

Penalty under section 271(1)(c) - disparity between the original return and the assessed income on revised return - ITAT deleted the addition - Held that - Admittedly, in the year 1959 the books of accounts of the assessee were seized. Having no other option the assessee filed income tax returns on estimation without enclosing the audit report, profit and loss account and balance sheet. After the books of accounts were returned, revised returns were filed. As the Assessing Officer found that there was disparity between the original return and the assessed income on revised return, penalty proceedings under section 271(1)(c) were initiated. The Assessing Officer had levied penalty at the rate of 20% which was set aside by the Tribunal. Since the assessee had filed revised return after books of account were returned and as on appreciation of facts the Tribunal found that there was no material on record to show the original return was not bonafide or there was no fraud or wilful neglect on the part of the assessee while filing the original returns and the Tribunal in appeal found that admission cannot give jurisdiction to the Assessing Officer to levy penalty, in our view, no substantial question of law arises from the order passed by the Income Tax Appellate Tribunal.- Decided in favour of assessee.

Summary

Issues involved:
- Appeal for leave to file appeal from the order passed by the Income Tax Appellate Tribunal
- Admittance of the appeal on substantial question of law regarding cancellation of penalties under section 271(1)(c) of the Income-tax Act, 1961
- Disparity between original returned income and income assessed by the Assessing Officer
- Challenge against the order of the Tribunal

Analysis:

The appellant, the C.I.T., Central I, filed an application seeking leave to file an appeal from the order passed by the Income Tax Appellate Tribunal, along with a prayer for stay of the said order. The appeal was sought on the substantial question of law regarding the cancellation of penalties under section 271(1)(c) of the Income-tax Act, 1961. The primary issue revolved around whether the Tribunal's decision to cancel penalties for concealment of income was erroneous in law. The appellant argued that there was a significant disparity between the original returned income and the revised return filed after the books of accounts were returned. The appellant contended that the penalty was just and proper as the assessee had agreed to levy a minimum penalty of 20%.

On the other hand, the respondent argued that the assessee had no choice but to file returns on an estimate basis initially, as the books of accounts were seized by the CBI. Subsequently, revised returns were filed after the books were returned. The respondent highlighted that the penalty proceedings were initiated based on the difference between the returned income and the income finally assessed by the Assessing Officer. The respondent contended that there was no finding of concealment of income or furnishing of inaccurate particulars, and the argument for penalty imposition lacked a basis.

The High Court analyzed the facts, noting that the books of accounts were seized in 1959, leading to the initial filing of returns without complete financial documents. After the books were returned, revised returns were submitted, resulting in a disparity between the original and revised income. The Assessing Officer initiated penalty proceedings under section 271(1)(c) based on this disparity, which was later set aside by the Tribunal. The Court emphasized that the Tribunal found no evidence to suggest lack of bonafide intent or fraudulent behavior in the original returns. Considering the Supreme Court's directive that admission cannot provide jurisdiction for penalty imposition, the Court concluded that no substantial question of law arose from the Tribunal's order. Consequently, the application and appeal were dismissed.