2022 (9) TMI 547 - AT - Income Tax

Penalty u/s. 271(1)(c) - Addition of sundry creditors - As submitted transactions were made by assessee through brokers - HELD THAT - As levy of penalty in present circumstances of case required some more evidence to prove that money had been flowed from the assessee to the creditor for such transactions and such money credited by the assessee in his books of accounts belongs to him. However, in this case those facts are absent and mere surrender of the amount by the assessee did not constitute that assessee wanted to evade tax by concealment of his income. It cannot be said that assessee has concealed the particular income with the meaning of section 271(1)(c) of the Act or there is not deep concealment for attaining as specified u/s. 271(1)(c) - assessment proceedings and penalty proceedings are distinct and findings given in the assessment proceedings though it constitutes good evidence cannot be conclusive in the penalty proceedings. In the penalty proceedings, the entire evidence in case has to undergo a reappraisal in order to establish the guilt of the assessee to prove that there was mensrea in the mind of assessee and to sustained penalty u/s. 271(1)(c) of the Act, the ingredients must be present as we discussed above. We after considering the facts and circumstances of the case we opined that it is not a fit case to levy penalty. Accordingly impugned order passed by the authority below is not in accordance with law and accordingly cancelled. Appeal filed by the assessee is allowed.

Issues:
1. Validity of the order of the Commissioner of Income Tax (Appeals)
2. Jurisdiction of the Commissioner of Income Tax (Appeals) in confirming penalty
3. Consideration of evidence in penalty proceedings
4. Distinction between assessment and penalty proceedings
5. Levy of penalty under section 271(1)(c) of the Income Tax Act

Issue 1: Validity of the order of the Commissioner of Income Tax (Appeals)

The appeal arose from the order of the Commissioner of Income Tax (Appeals) confirming the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The appellant raised several grounds of appeal challenging the validity of the CIT (A)'s order, alleging errors in law, lack of consideration of submissions, and exceeding jurisdiction. The Tribunal noted the absence of the appellant during the hearing despite repeated notices, leading to the decision to proceed ex parte based on available material.

Issue 2: Jurisdiction of the Commissioner of Income Tax (Appeals) in confirming penalty

The CIT (A) confirmed the penalty for "concealment of income" while the Assessing Officer had imposed it for "furnishing inaccurate particulars of income." The appellant argued that the CIT (A) overstepped jurisdiction by confirming the penalty. The Tribunal observed that the CIT (A) should not substitute the satisfaction of the Assessing Officer without proper enhancement. The appellant contended that the CIT (A) did not consider vital facts and failed to reject the quantity and cost of purchases, leading to doubts about the transaction's genuineness.

Issue 3: Consideration of evidence in penalty proceedings

The Tribunal analyzed the facts of the case, where the appellant, unable to produce certain parties for cross-examination, surrendered an amount for taxation to avoid litigation. The Assessing Officer invoked section 271(1)(c) of the Act based on this surrender, despite a lack of evidence proving concealment of income. The Tribunal emphasized the need for additional evidence to establish guilt in penalty proceedings, distinct from assessment findings. It concluded that the surrender alone did not constitute evasion of tax through concealment of income.

Issue 4: Distinction between assessment and penalty proceedings

The Tribunal highlighted the distinction between assessment and penalty proceedings, noting that findings in assessment proceedings, while relevant, are not conclusive for penalty determination. Reappraisal of all evidence is necessary to establish the guilt of the assessee for penalty under section 271(1)(c) of the Act. The Tribunal emphasized the requirement for mens rea and specific ingredients to sustain a penalty under this provision.

Issue 5: Levy of penalty under section 271(1)(c) of the Income Tax Act

After considering the facts and circumstances of the case, the Tribunal concluded that it was not a suitable case for levying a penalty. It found that the impugned order was not in accordance with the law and subsequently canceled the penalty imposed on the appellant under section 271(1)(c) of the Act. The appeal filed by the assessee was allowed, and the order was pronounced in Chennai on 26th August 2022.

This detailed analysis of the judgment addresses the issues surrounding the validity of the CIT (A)'s order, jurisdiction in confirming penalties, consideration of evidence in penalty proceedings, the distinction between assessment and penalty proceedings, and the levy of penalties under section 271(1)(c) of the Income Tax Act.

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