2022 (2) TMI 926 - HC - Income Tax

Penalty levied u/s 271 (1) (c) - rebates claimed by the appellants /assesses for the assessment years in question, were clearly the profits diverted by the fictitious claims and hence, the same were disallowed - HELD THAT - Assesses had concealed income, which was accepted after detection and the assessment was completed as per the terms of the settlement, which stipulated minimum penalty under section 271(1)(c). Based on the same, the assessing officer initiated the penalty proceedings by issuing show cause notices, to which, the appellants/assesses did not file any reply to substantiate their stand that there was no concealment of income. Therefore, the assessing officer imposed penalties on the appellants, which were also confirmed by the appellate authorities As the appellants had disclosed the income, after detection by the department and as per the terms of settlement, the assessing officer initiated the penalty proceedings, to which, the appellants / assesses did not submit any explanation to the effect that there was no concealment of income or furnishing of inaccurate particulars of such income, which culminated in imposition of penalties under section 271(1)(c), we do not find any infirmity or illegality in initiating the penalty proceedings and the consequential orders passed by the assessing officer as confirmed by the appellate authorities. - Decided against assessee.

Summary

Issues:
Challenging common order of Income Tax Appellate Tribunal regarding penalty under section 271(1)(c) of the Income Tax Act.

Analysis:
The tax case appeals were filed by the appellant, a metal decorating industry, challenging the ITAT's order related to assessment years 1975-80. The assessing officer found cross transactions of safety matches with rebates among group concerns, disallowing rebates as fictitious claims. Appeals were allowed, but fresh assessments led to penalty proceedings under section 271(1)(c) based on settlement terms. The penalties imposed were challenged before CIT(A) and Tribunal, which confirmed them, leading to the current appeals.

Upon examination, it was found that the rebates claimed were diverted profits through fictitious claims, disallowed by the assessing officer. The Tribunal directed a permanent settlement with CIT, including penalty under section 271(1)(c) on excess disallowed payments treated as concealed income. The appellants failed to explain during penalty proceedings, resulting in confirmed penalties by authorities.

The First Appellate Authority confirmed penalties due to intricate profit diversions by the group, indicating a long history of tax evasion. The Tribunal upheld penalties, noting planned concealment of income by the assesses over several years. The concealment was detected by the department, justifying penalty under section 271(1)(c).

Referring to the Supreme Court decision in Mak Data (P) Ltd. v. CIT, it was emphasized that voluntary disclosure does not absolve from penalties under section 271(1)(c). The burden is on the assessee to prove no concealment of income, which the appellants failed to do in this case. Consequently, the penalty proceedings and imposed penalties were deemed lawful and valid by the court.

In conclusion, the court dismissed all tax case appeals, ruling against the appellants/assesses on the substantial question of law. The penalties imposed by the assessing officer and confirmed by the appellate authorities were upheld, with no costs awarded in the matter.