2018 (5) TMI 1725 - AT - Income Tax

Penalty u/s 271(1)(c) - undisclosed source of income - survey proceedings - Held that - Assessee has deposited the tax raised by the AO during the survey conducted u/s 133A - thus in order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provisions cannot be invoked - the decision is followed of Manjunatha Cotton & Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT - thus where the assessee has paid the tax and the interest thereon in the absence of any material on record to show the concealment of income, it cannot be inferred that the said addition is on account of concealment - Decided in favor of assessee.

Summary

Issues:
- Appeals filed against CIT(A) order for assessment year 2009-2010
- Levy of penalty u/s.271(1)(c) for undisclosed income
- Justification of penalty by lower authorities
- Applicability of legal precedents on penalty imposition
- Assessment of concealment of income and imposition of penalty

Analysis:
1. Appeals against CIT(A) Order: Two separate appeals were filed by different assesses against the CIT(A) order for the assessment year 2009-2010. The appeals were interconnected and involved similar issues.

2. Levy of Penalty u/s.271(1)(c): The primary issue revolved around the levy of penalty under section 271(1)(c) for undisclosed income. The Assessing Officer (AO) initiated penalty proceedings after finding that the assessee could not explain the undisclosed source of income satisfactorily during a survey conducted in the premises. The assessee had accepted the addition made by the AO and paid the tax accordingly.

3. Justification of Penalty: During the appellate proceedings before the CIT(A), the assessee argued that since the tax raised by the AO was accepted and paid, the levy of penalty should not be sustainable. The legal standpoint was supported by the decision of the Hon'ble Supreme Court and the Hon'ble Karnataka High Court, emphasizing that penalty provisions cannot be invoked unless strictly covered by the provision.

4. Applicability of Legal Precedents: The Tribunal considered legal precedents, including the case of Reliance Petroproducts (P) Ltd. and Manjunatha Cotton & Ginning Factory, to establish that the imposition of penalty is not automatic even if the tax liability is admitted. It was highlighted that penalty proceedings should be initiated based on clear directions and grounds specified under Section 271(1)(c) to ensure adherence to principles of natural justice.

5. Assessment of Concealment of Income: The Tribunal, following the judicial decisions, concluded that in the absence of any material showing concealment of income and considering the assessee's payment of tax and interest, the levy of penalty could not be inferred. Therefore, the Tribunal decided to delete the penalties imposed by the lower authorities for the assessment year 2009-2010 in both appeals.

6. Conclusion: The Tribunal allowed the appeals of the assesses, emphasizing that the mere acceptance of additions and payment of tax without evidence of concealment does not warrant the imposition of penalties under section 271(1)(c). The decision was based on a thorough analysis of legal principles and precedents, ensuring fairness and adherence to procedural requirements.

7. Judicial Pronouncements: The Tribunal's decision was in line with the legal principles outlined by the Hon'ble Supreme Court in the case of Sir Shadi Lal Sugar & General Mills Ltd., emphasizing the importance of considering all relevant facts and evidence before inferring concealment or furnishing inaccurate particulars leading to penalty imposition.