2023 (1) TMI 832 - AT - Income Tax

Penalty u/s 271(1)(c) - concealing the particulars of income received by the assessee from M/s Chandan Carrier (a business which was effectively owned by the assessee) - HELD THAT - We observe that in the case of Patel Chemical Works 2008 (9) TMI 175 - GUJARAT HIGH COURT held that in penalty proceedings, factum of very same income having been offered to tax by different entity and having been taxed substantially in hands of other entity becomes a relevant factor for determining whether assessee has concealed said income or furnished inaccurate particulars regarding said income which has already been taxed after being shown in hands of different entity, namely, other than assessee. Now coming to the instant facts, we observe that the income which was sought to be taxed in the hands of the assessee has already been offered to tax as income in the hands of Shri Nilesh Shah for the impugned assessment year and the assessment proceedings have also been completed by the AO in respect of such income. Primary reason for levy of penalty is that the firm M/s Chandan Carrier is effectively held by the assessee, however, it is also a fact that the said income which is sought to be taxed by the AO in the hands of the assessee has already been offered to income by Shri Nilesh Shah (proprietor M/s Chandan Carrier). Therefore, respectfully following the decision of Gujarat High Court in the case of Patel Chemical Works 2008 (9) TMI 175 - GUJARAT HIGH COURT we hold that this is not a fit case for levy of penalty u/s 271(1)(c) of the Act and we hereby direct that the penalty may be deleted. Appeals of the assessee are allowed.

Summary

Issues Involved:
- Penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2006-07 and 2007-08.

Analysis:

Assessment Year 2006-07:
1. The case involved the imposition of a penalty of Rs.36,320 under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer (AO) added a sum of Rs. 1,07,890 in the hands of the assessee, alleging that the assessee was the benami owner of a transport business named M/s Chandan Carrier. The AO further imposed the penalty for concealing the particulars of income received from M/s Chandan Carrier. The CIT(A) confirmed the penalty, stating that the appellant was the actual owner of M/s Chandan Carrier, and the income had already been taxed in the hands of another individual. The appellant contended that the income in question had already been assessed in the name of the actual proprietor of M/s Chandan Carrier, Shri Nilesh Shah. The appellant relied on the case of Patel Chemical Works v. Assessing Officer to support this argument.

2. The Tribunal observed that the income sought to be taxed in the hands of the assessee had already been offered for taxation in the hands of Shri Nilesh Shah. Citing the decision of the Gujarat High Court in the Patel Chemical Works case, the Tribunal held that when the same income has been substantially taxed in the hands of another entity, it is a relevant factor in penalty proceedings. Therefore, the Tribunal concluded that the penalty under section 271(1)(c) should be deleted as the income in question had already been taxed in the hands of the actual proprietor of M/s Chandan Carrier.

Assessment Year 2007-08:
1. The penalty of Rs.67,610 imposed by the AO under section 271(1)(c) for this assessment year was also challenged by the assessee. Since the facts and issues were common for both years, the Tribunal directed that the penalty imposed for this year should also be deleted.

Conclusion:
In both assessment years, the Tribunal allowed the appeals of the assessee, directing the deletion of the penalties imposed under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal emphasized that when the same income has been taxed in the hands of another entity, it is a relevant factor in penalty proceedings, leading to the decision to delete the penalties in both cases.