2017 (3) TMI 132 - AT - Income Tax

Penalty u/s 271(1)(c) - non disclosure of income earned by way of Director Sitting Fee - Held that - Merely because AO has mentioned alternate charges at the stage of issue of notice u/s 274 r.w.s. 271(1)(c) of the Act which is a preliminary stage of initiating penalty proceedings, the proceedings cannot be held to be vitiated, as in the instant case, the AO has clearly recorded detailed satisfaction after application of mind in the assessment order dated 20-02-2014 as in the instant appeal the assessee was confronted and cornered by the Revenue to have not disclosed the income earned by way of Director Sitting Fee of ₹ 4,00,000/- and short term capital gains on redemption of HDFC Mutual Funds to the tune of ₹ 12,23,642/- in the return of income filed by the assessee with the Revenue, to which the assessee admitted and immediately after being confronted by Revenue filed revised computation of income and paid due taxes to the Revenue. By no stretch of imagination it can be held that the assessee was not aware of the charge as framed by the AO in the assessment order dated 20-02-2014 framed u/s 143(3) of the Act with which he was burdened for initiating penalty proceedings u/s 271(1)(c) of the Act. We have also observed that in the order dated 26-08-2014 passed by the AO u/s 271(1)(c) of the Act levying penalty on the assessee, the AO after considering the explanation of the assessee has clearly recorded the charge on which penalty had been levied on the assessee u/s 271(1)(c) as held that merely because the assessee is not maintaining books of accounts, he cannot get rid of offering the income earned by him during the year. Thus penalty confirmed - Decided against assessee

Issues Involved:
1. Validity of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.
2. Whether the penalty was levied due to concealment of income or furnishing inaccurate particulars of income.
3. Applicability of mens rea in penalty proceedings.
4. Adequacy of notice issued under Section 274 read with Section 271(1)(c) of the Act.

Detailed Analysis:

1. Validity of Penalty Proceedings under Section 271(1)(c) of the Income Tax Act, 1961:
The assessee's appeal contested the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961, arguing that the penalty order was void ab initio due to lack of clarity at the initiation stage regarding the relevant clause under which the penalty proceedings were initiated. The Tribunal noted that the assessment order dated 20-02-2014 determined the total income of the assessee at ?4,49,05,250/- against the returned income of ?4,32,81,605/-, with additions made on account of director’s sitting fees and short-term capital gains. The Tribunal upheld the validity of the penalty proceedings, emphasizing that the AO had recorded detailed satisfaction before invoking the penalty provisions, thereby showing application of mind.

2. Whether the Penalty was Levied Due to Concealment of Income or Furnishing Inaccurate Particulars of Income:
The Tribunal examined whether the penalty was imposed due to concealment of income or furnishing inaccurate particulars of income. The AO observed that the assessee did not disclose director’s sitting fees and short-term capital gains in the return of income filed. The assessee contended that the omission was due to oversight and non-maintenance of books of accounts. However, the AO found that the assessee only disclosed the income after being specifically queried during the assessment proceedings, indicating an intention to evade taxes. The Tribunal concurred with the AO's findings, holding that the assessee had concealed income by furnishing inaccurate particulars.

3. Applicability of Mens Rea in Penalty Proceedings:
The assessee argued that there was no mens rea or malafide intention to conceal income. The Tribunal referred to the AO's observation that the assessee did not voluntarily disclose the income even after receiving statutory notices and only did so when confronted. The Tribunal held that the conduct of the assessee indicated mens rea, as the assessee's actions demonstrated an intention to evade taxes. The Tribunal emphasized that the penalty under Section 271(1)(c) is a civil liability, and wilful concealment is not an essential ingredient for attracting civil liability.

4. Adequacy of Notice Issued under Section 274 Read with Section 271(1)(c) of the Act:
The assessee contended that the notice issued under Section 274 read with Section 271(1)(c) was vague and did not specify the charge, thus violating principles of natural justice. The Tribunal examined the notice dated 20-02-2014 and found that it was a typed notice, not a standard printed format, and clearly framed alternate charges for levying penalty. The Tribunal held that the notice was adequate and showed application of mind by the AO. The Tribunal distinguished the present case from other cited cases where notices were found to be vague or lacked specific charges.

Conclusion:
The Tribunal dismissed the appeal, confirming the penalty of ?3,13,000/- under Section 271(1)(c) of the Act. The Tribunal held that the penalty proceedings were valid, the assessee had concealed income by furnishing inaccurate particulars, and the notice issued under Section 274 was adequate and showed application of mind by the AO. The Tribunal emphasized that the penalty under Section 271(1)(c) is a civil liability, and the assessee's conduct indicated mens rea.

← Previous Next →