2013 (7) TMI 173 - HC - Income Tax

Penalty overturned due to lack of clarity in establishing concealment vs. inaccuracy

The Tribunal overturned the penalty imposed under Section 271(1)(c) of the Income Tax Act, emphasizing the Assessing Officer's failure to clearly ... Penalty u/s 271(1)(c) - concealment of income - Held that:- Assessing Officer in the order of penalty also did not come to a clear finding regarding penalty being imposed on concealment of income or on furnishing inaccurate particulars of income. Even otherwise in the order in original of the assessment or in the penalty order, being the original order of assessment, the Assessing Officer had come to the conclusion that for want of suppling sufficient material by the assessee, the claim of commission cannot be accepted. He had not come to any definite finding that the claim was not genuine or totally bogus. - Decided in favour of assessee. Issues:1. Whether the Tribunal was right in deleting the penalty for concealment of incomeRs.2. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.Analysis:1. The issue pertains to the penalty of Rs.11.31 lakhs imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer disallowed the claim of Rs.25.58 lakhs towards commission paid by the assessee in the original assessment, citing lack of confirmation from the commission recipient and uncertainty about the recipient's tax status. Subsequently, a penalty was imposed, which was confirmed by CIT(Appeals. However, the Tribunal overturned this decision, emphasizing that the Assessing Officer failed to clearly establish whether the penalty was for concealing income or furnishing inaccurate particulars.2. The Assessing Officer, in the penalty order, stated that the assessee concealed income/furnished inaccurate particulars of income. However, upon review, it was observed that the Assessing Officer did not provide a definitive finding regarding the nature of the penalty. The Tribunal correctly noted this ambiguity, leading to the decision to delete the penalty. The Tribunal's decision was supported by precedents and established principles, emphasizing the necessity of a clear and specific determination in penalty orders.3. The Counsel for the Revenue argued that the original assessment findings regarding the commission payment's genuineness were not challenged effectively during the penalty proceedings. Despite this argument, the High Court upheld the Tribunal's decision, highlighting the Assessing Officer's failure to conclusively establish the basis for the penalty. The Court referred to previous judgments to support the importance of clear findings in penalty orders.4. Ultimately, the High Court dismissed the Tax Appeals, noting that the Assessing Officer did not definitively declare the commission claim as non-genuine or entirely false. The Court acknowledged the potential for the Revenue to argue for the penalty's validity based on insufficient material supplied by the assessee. However, in this case, the lack of a clear finding in the original assessment or penalty order regarding the claim's genuineness led to the dismissal of the appeals.In conclusion, the High Court's judgment focused on the necessity of clear and specific findings in penalty orders under Section 271(1)(c) of the Income Tax Act, emphasizing the importance of establishing whether the penalty is for concealing income or furnishing inaccurate particulars.