2016 (9) TMI 297 - HC - Income Tax

Penalty u/s 271(1)(c) - Assessee had filed its returns under Section 115JB - Held that - What is of importance is that at the time when jurisdiction is assumed by the AO i.e. upon completion of proceedings or within the time stipulated by forming an opinion that there is no concealment of income, there should be objective material to reach the conclusion that such concealment is material having regard to the nature and circumstances of the case, especially where two computations are involved. At the stage when the AO sought to assume jurisdiction and form an opinion, the assessment was completed under Section 115JB. Concededly, there was no concealment of any material particulars in respect of that part of the return. The concealment found was in respect of normal computation. That the normal computation involved certain disallowances at later and higher stages of the proceedings at the first appellate and the ITAT s proceedings reflect the unfortunate circumstances of the litigating parties. That would not in any manner deviate from the fact as to whether the AO could have assumed, on the basis of the opinion that there was concealment of income which led to revenue loss. If the revenue evasion were to be accepted, a satisfaction which was otherwise warranted at the time when it was recorded because of operation of Section 115JB(1) or other such like provision would remain pending for about 15 years and the revenue can hopefully urge at later stage that an opinion formed which was not valid at the time it was made, can be revived after a period of hibernation to revisit the assessee. Such circumstances can hardly be called satisfactory or lead to any certainty; it will anyway lead to no certainty in law at all; we are satisfied that no question of law arises.

Summary

Issues:
1. Deletion of penalty amounts assessed under Section 271(1)(c) of the Income Tax Act.
2. Interpretation of the term "concealment" under Section 271(1)(c) in the context of Explanation 4.
3. Time-barred Show Cause Notice (SCN) for penalty proceedings.

Issue 1: Deletion of penalty amounts assessed under Section 271(1)(c) of the Income Tax Act:
The case involved the deletion of penalty amounts assessed under Section 271(1)(c) of the Income Tax Act by the Income Tax Appellate Tribunal (ITAT). The Assessing Officer (AO) initiated penalty proceedings against the assessee based on an earlier satisfaction opinion recorded regarding concealment of income. The CIT(A) later deleted the penalty order, which was challenged by the revenue in an appeal to the ITAT. The ITAT affirmed the CIT(A)'s decision to delete the penalty order. The revenue contended that the ITAT erred in concluding that the question of concealment had been finally determined in the quantum proceedings and that the Show Cause Notice (SCN) was not time-barred.

Issue 2: Interpretation of the term "concealment" under Section 271(1)(c) in the context of Explanation 4:
The Court analyzed the term "concealment" under Section 271(1)(c) in light of Explanation 4. Reference was made to the judgment in CIT v. Gold Coin Health Food (P) Ltd. where it was held that even if concealed income leads to a reduced loss in the returned income, penalty can still be imposed. However, in the present case, the income was assessed under Section 115JB, not the normal provisions. The Court emphasized that the concealment did not lead to tax evasion as tax was paid based on the income assessed under Section 115JB. Therefore, the concealment was deemed irrelevant for penalty proceedings under Section 271(1)(c).

Issue 3: Time-barred Show Cause Notice (SCN) for penalty proceedings:
The Court addressed the argument regarding the time-barred Show Cause Notice (SCN) for penalty proceedings. It was argued that the AO had assumed jurisdiction based on a satisfaction opinion formed at the completion of proceedings under Section 115JB, where no concealment was found. The concealment was related to the normal computation, which underwent changes at later stages. The Court emphasized the importance of objective material to establish concealment, especially in cases involving multiple computations. It concluded that the AO's assumption of jurisdiction based on concealment of income was not valid, given the circumstances of the case. The appeal was dismissed, highlighting the need for certainty in law and the absence of a valid question of law.

This detailed analysis of the judgment addresses the issues of deletion of penalty amounts, interpretation of "concealment" under Section 271(1)(c) with Explanation 4, and the time-barred Show Cause Notice for penalty proceedings, providing a comprehensive understanding of the legal reasoning and conclusions reached by the Court.