2015 (12) TMI 975 - HC - Income Tax

Levy of penalty under section 271(1)(c) on estimated brokerage income and qua non discharge of burden under section 271(1)(c) - Held that - A perusal of the findings recorded by the Tribunal show that the assessee had not furnished his return of income for the year under consideration within the time allowed under section 139 of the Act. Survey operations were carried out under Section 133A of the Act at the office premises of the appellant who was engaged in giving accommodation/book entries on account of long/short term capital gains/gifts/loans by charging commission. The modus operandi was that cash received from different beneficiaries was deposited in various bank accounts of the appellant, his family members and other share brokers from where cheques were issued in favour of clients for bogus capital gains/share profits/gifts etc. The appellant in his statement recorded during the course of survey operation on 15.6.2004 admitted to have issued cheques/drafts for bogus profits in return of the cash provided to him by his clients. The appellant also disclosed the names of various concerns under which he was carrying on his business and also the bank accounts from where cheques/drafts were issued. The appellant after the conclusion of the survey vide letter dated 1.3.2005 made surrender of ₹ 27 lacs i.e. ₹ 15 lacs relating to the assessment year 2004-05 and ₹ 12 lacs relating to the assessment year 2005-06. The income surrendered by the appellant was disclosed in the return of income furnished for the assessment years 2004-05 and 2005-06. The appellant had not furnished any return of income since after the assessment year 1996-97 till the date of survey on 25.6.2004. Information was collected during the survey operation that the business was being carried out in the earlier years also. In view of the information gathered during the survey, the Assessing Officer found that the appellant s income relevant to the assessment year 2002-03 had escaped assessment within the meaning of section 147 of the Act and hence proceedings under Section 148 of the Act were initiated. The investments made by the assessee were not declared and thus there was clear cut case of concealment. - Penalty confirmed - Decided against assessee

Summary

Issues:
1. Levy of penalty under section 271(1)(c) on estimated brokerage income and non-discharge of burden under section 271(1)(c) Explanation 1.

Analysis:
The judgment involved the disposal of ITA Nos. 386, 390, and 412 of 2014, with the issue being identical in all appeals. The facts were extracted from ITA No. 386 of 2014, where the appellant, a Fellow Chartered Accountant, underwent a survey under Section 133A of the Income Tax Act. Subsequently, penalty proceedings were initiated under Section 271(1)(c) for concealment and furnishing inaccurate particulars of income. The appellant challenged the penalty imposition, arguing that since the income was estimated, penalty levy was unwarranted. The Tribunal found that the appellant had not filed returns for several years, concealed income, and engaged in dubious financial activities, leading to the penalty imposition.

Regarding the penalty imposition, the Tribunal considered various cases where penalties were deleted due to estimation of income. However, in the present case, the Tribunal found clear concealment of income by the appellant, leading to the penalty imposition under Section 271(1)(c). The appellant relied on the National Textiles case, emphasizing the need for reasonable conclusions and conscious concealment for penalty justification. While acknowledging this legal principle, the Tribunal upheld the penalty, finding no error in the lower authorities' conclusions.

The judgment highlighted that the appellant failed to demonstrate any perversity or error in the Tribunal's findings, leading to the dismissal of the appeals. The court affirmed the penalty imposition due to the appellant's concealment of income, as established by the authorities. The judgment emphasized the importance of conscious concealment or furnishing inaccurate particulars to justify penalty under Section 271(1)(c), which was found to be present in this case.

In conclusion, the court dismissed the appeals, upholding the penalty imposition under Section 271(1)(c) based on the appellant's concealment of income. The judgment reiterated the legal principle that penalty levy requires evidence of conscious concealment or inaccurate particulars, which was established in this case through the appellant's actions and financial activities.