2015 (11) TMI 1739 - HC - Income Tax

Court Upholds Assessee's Explanation, Dismisses Revenue's Penalty Appeal

The Court dismissed the Revenue's appeal against the deletion of penalty under Section 271(1)(c) for the AY 2008-09. It was held that the Assessee's ... Levying penalty u/s 271(1)(c) - assessee had furnished inaccurate particulars thereby concealing his income - failure to produce “the books of accounts and failed to file various relevant evidences such as vouchers and supportings which are necessary for the purpose of completion of assessment - Held that:- In the present case, it is not possible to conclude that there had been any concealment of income as such by the Assessee. Although the assessment order assessed the income by taking the net profit rate @ 5% of the gross turnover, for the same to be considered as concealed income under Section 271(1) (c), either of conditions (A) or (B) of Explanation 1 to Section 271(1) must be fulfilled. It is one thing to say that the explanation about the dispute the Assessee had with his accountant, as a result of which the vouchers could not be produced, was not offered in the first instance before the AO and only subsequently before the CIT (A). It is another to state that the said explanation was either false or not bona fide. The Revenue has not been able to show that the explanation offered by the Assessee either lacked in bona fides or was false. The Court is satisfied that the CIT (A) was not in error in accepting the explanation offered by the Assessee and deleting the penalty. - Decided in favour of assessee. Issues:1. Justification of penalty under Section 271(1)(c) for furnishing inaccurate particulars.2. Interpretation of Explanation 1 to Section 271(1) regarding failure to produce vouchers.3. Assessment of concealed income and fulfillment of conditions under Explanation 1.Analysis:1. The appeal was filed by the Revenue against the ITAT order upholding the CIT (A) order deleting the penalty under Section 271(1)(c) for the AY 2008-09. The AO levied the penalty on the Assessee for furnishing inaccurate particulars concealing income.2. The Assessee failed to produce vouchers during assessment, leading to the penalty notice. The AO held that the Assessee concealed income by not providing necessary supporting documents. The Assessee explained that vouchers were misplaced by the accountant, causing the inability to produce them. The Revenue relied on the case of Mak Data P. Ltd. v. CIT, emphasizing the importance of producing vouchers to substantiate accounts.3. The Court analyzed the conditions under Explanation 1 to Section 271(1) for concealing income. It was noted that the Assessee's explanation was not proven false, but rather the vouchers were genuinely unavailable due to a dispute with the accountant. The Court distinguished the present case from Mak Data P. Ltd. by emphasizing the lack of evidence showing the Assessee's explanation as false or lacking bona fides. Therefore, the Court upheld the CIT (A) decision to delete the penalty, as the Assessee's explanation was considered bona fide.4. The Court concluded that no substantial question of law arose, and the appeal was dismissed. The judgment highlighted the importance of fulfilling the conditions under Explanation 1 to Section 271(1) for levying penalties related to concealing income, emphasizing the need for genuine and substantiated explanations in such cases.