2016 (5) TMI 339 - AT - Income Tax

Penalty under Section 271(1)(c) not applicable without finding of concealment or inaccurate particulars

Meeta Gutgutia Versus ACIT, Central Cirle-10, New Delhi

The ITAT Delhi held that penalty under section 271(1)(c) was not imposable as there was no finding of concealment or furnishing of inaccurate particulars ... penalty u/s 271(1)(c)- Held that:- It is an undisputed fact that the returned income has been accepted, there is no satisfaction recorded by the assessing officer that assessee had concealed income with reference to return of income filed by him in response to notice u/s 148. Supreme Court in Varkey Chacko v. CIT [1993 (8) TMI 1 - SUPREME Court ] has held that a penalty for concealment of particulars of income or for furnishing inaccurate particulars of income can be imposed only when the assessing authority is satisfied that there has been such concealment or furnishing of inaccurate particulars. A penalty proceeding, therefore, can be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. The penalty was permissible under the law on the date on which the offence of concealment of income was committed, that is to say, on the date of the offending return Of greater importance is the necessity for a definite finding that there is concealment, as without such a finding of concealment, there can be no question of imposing any penalty. In the assessee’s case, the AO has not given any finding in assessment order that the assessee had concealed any income or furnished inaccurate particulars of such income. He had simply accepted the returned income u/s 148. Hence assessee’s case is covered by the decisions referred to above and penalty u/s 271(1)(c) will not be imposable. - Decided in favour of assessee Issues:Assessment of concealed income under section 147 of the Income Tax Act, 1961 and initiation of penalty proceedings under section 271(1)(c) for concealment of income.Analysis:Issue 1: Assessment of Concealed IncomeThe case involved the initiation of assessment proceedings under section 147 of the Income Tax Act, 1961 based on information indicating that the assessee's income had escaped assessment. The Assessing Officer identified discrepancies in the income declared by the assessee and the income reflected in Form No. 26AS filed by the deductor. The assessee had also derived income from a proprietorship concern. The assessment was completed under section 148/143(3) at a total income of Rs. 51,53,610/- as declared by the assessee. The Assessing Officer treated the income declared in response to the notice under section 148 as concealed income, leading to the initiation of penalty proceedings under section 271(1)(c).Issue 2: Penalty Proceedings for Concealment of IncomeThe penalty proceedings were initiated under section 271(1)(c) for alleged concealment of income. The Assessing Officer imposed a penalty of Rs. 21,121,454/-, which was later reduced by the First Appellate Authority to 100% of the tax allegedly sought to be evaded. The assessee contended that the returned income was accepted and assessed without any addition. The assessee argued that there was no concealment or furnishing of inaccurate particulars of income under section 271(1)(c). The assessee highlighted that the accounts were audited, and the tax audit report was obtained within the due date. The assessee also pointed out that the TDS deducted was duly reflected in Form 26AS. The assessee emphasized that penalty proceedings were not legally sustainable.Judgment:The ITAT Delhi held that for a penalty under section 271(1)(c) to be imposed, the assessing authority must be satisfied that there was concealment or furnishing of inaccurate particulars of income. In this case, as the returned income was accepted without any finding of concealment or inaccurate particulars, the penalty was not imposable. The ITAT referred to relevant judicial pronouncements emphasizing the necessity of a definite finding of concealment before imposing a penalty. Since the Assessing Officer did not record any finding of concealment in the assessment order and simply accepted the returned income, the penalty under section 271(1)(c) was deemed not imposable. The ITAT directed the Assessing Officer to delete the penalty, and the appeal of the assessee was allowed.