2019 (11) TMI 1007 - AT - Income Tax

Rectification of mistake - Penalty u/s 271(1)(c) - Addition u/s 68 - Rectification petition u/s 154 by assessee for cancellation of penalty levied u/s 271(1)(c) stating that there is no sanction in the act for levy of penalty as per normal provisions, when the assessee paid the tax u/s 115JB - HELD THAT - From plain reading of section 271(1)(c), before amendment, the words used are the concealed income or the income relating to which the assessee has furnished the inaccurate particulars. In the Finance Act, it was mentioned that where concealment of income was computed under the general provisions have taken place, penalty under 271(1)(c) should be leviable even if the tax liability of the assessee for the year has been determined under the provisions of section 115JB or 115JC of the Act. There were diverging decisions with regard to levy of penalty u/s 271(1)(c) prior to the amendment. As per the pre amended provisions, the concealment of income generally referred to the general provisions of the Act, since, 115JB is always referred to as book profits and the tax paid under the scheme of 115JB is given credit in regular taxes. From the plain reading of the penalty order, there is no mistake which is visible from the order. The issue with regard to amendment made vide Finance Act, 2015 has no application in the assessee s case. Since the concealment of income referred to in 271(1)(c) of the Act is in respect of tax sought to be evaded is defined in Explanation 4 w.r.t. the income and the potential tax effect, the issue is required to be debated by long drawn process to decide the issue and cannot be adjudicated u/s 154 of the Act. No infirmity in the order of the Ld.CIT(A) and the same is upheld. The appeal of the assessee is dismissed.

Summary

Issues:
Appeal against rejection of petition under section 154 of the Income Tax Act related to penalty levied under section 271(1)(c) for Assessment Year 2003-04.

Analysis:
The appeal was filed by the assessee against the rejection of the petition filed under section 154 of the Income Tax Act concerning the penalty imposed by the Assessing Officer under section 271(1)(c) for the Assessment Year 2003-04. The assessee declared a total income of Rs. Nil after setting off brought forward losses and admitted book profits under section 115JB. The Assessing Officer made various additions, including unexplained deposits under section 68. Subsequently, a penalty of Rs. 5,68,500 was levied under section 271(1)(c) as the assessee did not provide an explanation for the additions made. The assessee filed a rectification petition under section 154, arguing that the penalty was not justified as the tax was paid under section 115JB. However, the petition was rejected by the Assessing Officer, stating that there was no mistake apparent from the record.

The assessee then appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who also dismissed the appeal. Subsequently, the assessee approached the Appellate Tribunal, arguing that since the tax was paid under section 115JB, there was no basis for levying the penalty under section 271(1)(c). The assessee highlighted an amendment to section 271(1), Explanation 4(a) introduced by the Finance Act (No.2), 2015, which was argued to be applicable in this case. The Tribunal heard arguments from both sides, with the assessee contending that the penalty was not justified under the existing provisions and the amendment should be considered. On the other hand, the Departmental Representative argued that the amendment did not apply to the assessee's case.

After considering the submissions, the Tribunal observed that the penalty under section 271(1)(c) was initiated due to concealed income or inaccurate particulars furnished by the assessee. The Tribunal noted that the amendment introduced by the Finance Act, 2015 did not apply in this case. The Tribunal found no apparent mistake in the Assessing Officer's decision to levy the penalty, as the issue required a detailed examination rather than a simple rectification under section 154. Therefore, the Tribunal upheld the decision of the CIT(A) and dismissed the appeal of the assessee. The appeal was concluded with the dismissal of the assessee's appeal.

In conclusion, the Tribunal's decision emphasized that the penalty under section 271(1)(c) was justified based on the concealed income or inaccurate particulars furnished by the assessee. The Tribunal found no basis to apply the amendment introduced by the Finance Act, 2015 in this case and upheld the penalty imposed by the Assessing Officer. The decision highlighted the complexity of the issue, requiring a detailed examination rather than a simple rectification under section 154.