Penalty u/s 271 (1)(c)

Notification 8715 views 6 replies

CA Dhiraj Ramchandani

CA M. com

10823 Points Joined November 2008

Assessing Officer cannot impose penalty u/s. 271(1)(c) on the basis of routine and general presumptions

Whether it be a case of only concealment or of only inaccuracy of particulars or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceedings by the ITO, who on being satisfied about each concealment or inaccuracy of particulars of income would be in a position to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected.

CASE LAWS DETAILS

DECIDED BY: ITAT, MUMBAI BENCH `K’, MUMBAI, IN THE CASE OF : ITO v. Oasis Securities Ltd., APPEAL NO: ITA No. 846/M/2008, DECIDED ON: January 29, 2010

RELEVANT PARAGRAPH

7.3 Now coming to the merits of the case, we noticed that the AO levied penalty u/s 271(l)(c) on the ground that the assessee has filed inaccurate particulars of income. What is inaccurate particulars of income within the meaning of provisions of section 271(l)(c) of the Act has been discussed in details by the 1TAT Mumbai Bench in the case of Mimosa Investment Co. Pvt. Ltd, in ITA NO. 2983/Mum/07 for AY 2004-05 order dated 15.01.09. The said order has been followed by the ITAT in the case of ITO Vs. GACL Ltd. in ITA No. 6528/M/05 vide order dated 19.03.2009, the decision cited by the learned AK. The facts of the case of ITO Vs. GACL Ltd were that the assessee claimed loss as loss from trading of shares. The Assessing Officer treated the said loss under Explanation to section 73 and treated the same as deemed speculation loss. The Assessing Officer has apportioned the interest and other expenses attributable to speculation business income. Penalty u/s 271(l)(e) levied by the AO has been cancelled by the ITAT following their another decision in case of Mimosa Investment Co Pvt. Ltd, ITA NO 2983/Mum/07 for AY 2004-05 order dated 15.01.09 wherein it was held that the proceedings under section 271(1) (C) can be initiated only if the A.O or the first Appellate authority is satisfied in the course of any proceedings under the Act. If he is satisfied as per clause (c) that any person has concealed the particulars of his income or has furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty the sum mentioned in sub-clause (iii) of clause (c). The expression used in clause (c) is ‘has concealed the particulars of his income’ or ‘furnished inaccurate particulars of such income’. Therefore, both in eases of concealment and inaccuracy the phrase ‘particulars of income’ are used. It will be noted that as regards concealment, the expression in clause (c) is ‘has concealed the particulars of his income’ and not ‘has concealed his income’, The expressions “has concealed the particulars of income” and has furnished inaccurate particulars of income” have not been defined either in section 271(l)(c) or elsewhere in the Act. There cannot be a straight jacket formula for detection of these defaults of concealment of particulars or of furnishing inaccurate particulars of income. It depends upon the facts of the each case. There was concealment or not is, ordinarily, a question of fact. Once bearing in mind the correct principles comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact. Similarly, whether the explanation offered by the assessee was bona fide or not is also a question of fact. In the assessment proceedings the ITO ascertaining the total income chargeable to tax would be in a position to deduct the specific or definite particulars of income concealed or inaccurate particulars are furnished. Where in the constituents of income returned, such specific or definite particulars of income are detected as concealed, then even in the total income figure to that extent they reflect, it would amount to concealment to that extent. In the same way where specific and definite particulars of income are detected as inaccurate, then such figure will also make the total income inaccurate in particulars to the extent it does not include such income. In other words the AO cannot invoke provision of section 271(1)(c) on the basis of routine and general presumptions. Whether it be a case of only concealment or of only inaccuracy of particulars or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceedings by the ITO, who on being satisfied about each concealment or inaccuracy of particulars of income would be in a position to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected.

7.4 It was also held that from the scheme of the Act, two important things come out arc that it is the duty of the assessee to furnish particulars of income which should be accurate particulars, simultaneously he has right to claim all exemptions and deductions provided in the Act, according to the assessee for which he is entitled. The duty of the Assessing Officer is to assess real and correct income in accordance with law. The CBDT in its Circular No. 14(XL35) of 1955 dated 11.04.1955 stated that officers of the Department must not take advantages of ignorance of an assessee as to his rights, it is one of their duties to assist a tax payer in every reasonable way On the basis of detailed discussions in this regard the ITAT observed that after furnishing particulars regarding determination of income the assessee has right to claim exemption and deduction, according to him which are as per law .The Assessing Officer while discharging his duty allow or disallow assessee’s claim and arrived at. a different figure of total income then the total income declared by the assessee, that case cannot be said to be a case of furnishing inaccurate particulars or concealing of particulars of income.

7.5 In the light of above discussions and the decisions of the 1TAT, we find that on identical set of facts, the ITAT has cancelled the penalty levied u/s 271(l)(c), therefore, to maintain consistency we bound to follow the decisions of ITAT and in the light of that the order of CIT(A) is upheld. On merit, we find that in the case under consideration the assessee has filed all particulars of income which were necessary for determining total income. The assessee was of the view that the expenses related to own share trading/speculation business activities were negligible therefore apportionment of expenses toward own share trading/speculation business was not necessary. Whereas the AO was of the view that apportion of expenses in between speculation business and other business were required and he do so on the basis of particulars file by the assessee. Merely the AO and assessee were having different views that does not amount to a case of furnishing inaccurate particulars of income. Under the circumstances this is not a case of furnishing inaccurate particulars. Since it is not a case of furnishing inaccurate particulars, penalty provisions under section 271(l)(c) are not applicable, we accordingly find that the CIT(A) has rightly directed AO to exclude the amount of Rs. 34,23,891/- for calculation of penalty u/s 27 1 (l)(c).

Replies (6)

Surrender

CEO

461 Points Joined May 2010

Differing opinion of ITo vis-a-vis Assessee may not be termed " inaccurate particulars of Income"

CA Hemlata Saini

Chartered Accountant

163 Points Joined July 2008

Anyone please post reply for panelity order u/s section 271(1)(c).

Matter:- Additional tax imposed on interest on unsecured loan as TDS not paid on the same

Please quote any favourable case law available

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

Originally posted by : Hemlata Saini
	Anyone please post reply for panelity order u/s section 271(1)(c). Matter:- Additional tax imposed on interest on unsecured loan as TDS not paid on the same Please quote any favourable case law available

in case of non deduction of TDS, the entire interest credited is disallowed and assessee has to pay tax on it with interest,

Surrender

CEO

461 Points Joined May 2010

There are numerous such Judgements against such routine proceedings generally initiated by Assessing Authorities, rather mechanically !

All that adds to the ever growing pendencies in such avoidable litigation !

CA ANAND JINDAL

Professional

137 Points Joined October 2009

Punjab & Haryana High Court in an important case namely CIT V M/S Careers Education and Infotech Pvt. Ltd., has held that voluntarily surrender of income cannot exonerate the assessee of its liability to pay penalty if it can be held that there was concealment of Income or furnishing of inacurate particulars. But in every case of surrender, inference of concealment of income cannot be drawn by itself by applying section 58 of Evidence Act.

The AO must establish and prove the concealment of income even if there is surrunder of income by assessee and mere surrender cannot lead to levy of penalty u/s 271(1)(c) for concealment of income.

Facts of the case: During the course of survey, the assessee surrendered additional income and also filed revised return accordingly. The Assessing Officer accepted the revised return made by the assessee but also initiated penalty proceedings. Thereafter, penalty was also levied on the assessee which was upheld by the CIT(A) following judgment of the Madras High Court in P. Govindaswamy v. CIT {2000} 244 ITR 510. Therein, it was held that since under Section 58 of the Evidence Act, 1872, admitted facts need not be proved, once the assessee made surrender, it could be taken to be admitted that the assessee had concealed income.

On appeal to Tribunal it was asserted by Tribunal that the AO has not uttered a single word in the assessment order to say that there was any concealment of income of assessee having noticed by the survey team or by the AO himself.

Tribunal further asserted that The AO has imposed the penalty considering the additional income as income from undisclosed sources and has alleged the assessee has filed revised return only after detection of concealed income during the course of survey. In case there was any detection of concealed income either by the survey team or by the AO, why the same has not been pointed out in the assessment order. Not an iota of evidence was narrated to support the addition made except the surrender made by the assessee himself. When no concealment was ever detected by the survey team or by the AO, no penalty was imposable.
On Appeal to High court the appeal was dismissed uphelding the assertion and verdict of tribunal.

Verdict of High Court: No doubt even voluntary surrender of concealed income may not exonerate the assessee of its liability to pay penalty if it can be held that there was concealment of income or furnishing of inaccurate particulars. In the present case, the Tribunal has recorded a categoric finding that there was no material to infer concealment of income or furnishing of inaccurate particulars. The contention that in every case where surrender is made inference of concealment of income must be drawn under Section 58 of the Evidence Act cannot be accepted. Judgment of the Madras High Court also does not lay down such wide proposition. The observations therein are on facts of that case. The said judgment is, thus, distinguishable.

Heena

article clerk

21 Points Joined December 2009

i wana know wat if assessing officer in a case of scrutiny founds a bank account not shown by assessee and A.o assumes that bank account closing balance as assessee's income.....and assessee agrees to pay tax and interst on that income..............................is there any room for nt paying penalty u/s 271 (1)c ?????