2016 (10) TMI 499 - HC - Income Tax

Tribunal's Decision Upheld: Penalty Deletion under Income Tax Act Section 271(1)(c)

Pr. Commissioner of Income Tax-3 Ahmedabad Versus Shree Ram Corporation

The High Court upheld the Tribunal's decision to delete a penalty of Rs. 77.25 lakhs under section 271(1)(c) of the Income Tax Act. The Court found that ... Penalty u/s. 271(1)(c) - assessee failure to submit accurate particulars of the income - Tribunal quashed the penalty observing that when the return of income was accepted as it is, there was no question of thereafter, imposing the penalty - Held that:- The assessee itself was never subjected to search or survey, Revenue could also have relied on explanation 5 or 5A as the case may be of section 271 to levy penalty. Even though the income has been disclosed in the return filed subsequently, section 271(1)(c) would permit the Assessing Officer to levy penalty equal to or not exceeding three times the amount of tax sought to be evaded by reason of concealment of particulars of income or furnishing of inaccurate particulars of such income. In the present case, when the assessee had declared certain income which was accepted by the Assessing Officer, it would not be even the case of the Revenue that any income was sought to be evaded. The Tribunal therefore, in the facts of the case, committed no error. - Decided against revenue. Issues:1. Appeal against the deletion of penalty under section 271(1)(c) of the Income Tax Act.2. Interpretation of the provisions of section 271(1)(c) in relation to penalty imposition.3. Application of explanation 5 and 5A of section 271 for penalty assessment.4. Assessment of penalty when the return income is accepted without additions.Analysis:The High Court dealt with an appeal challenging the deletion of a penalty of Rs. 77.25 lakhs under section 271(1)(c) of the Income Tax Act. The Tribunal had deleted the penalty, prompting the Revenue to appeal. The questions for consideration were whether the Tribunal erred in law by deleting the penalty and not appreciating the specific clause under explanation 4 of section 271(1)(c). The Tribunal based its decision on the absence of factual disputes, noting that the assessee had admitted on-money receipts as income in the return filed after a search. The Tribunal referred to a relevant High Court decision and concluded that no penalty should be levied when no addition is made post the search return, treating it as filed under section 139. The High Court observed that the deeming fiction of concealment was not attracted, leading to the deletion of the penalty.Regarding the absence of search or survey operations on the assessee, the Court highlighted that the search action was part of a group case involving incriminating materials related to the assessee's business activity. Despite the Assessing Officer accepting the income without additions for the assessment year in question, penalty proceedings were initiated under section 271(1)(c) for alleged failure to provide accurate income particulars. The Tribunal's decision to quash the penalty was based on the rationale that accepting the return income as is precluded imposing a penalty afterward.In analyzing the application of explanation 5 and 5A of section 271 for penalty assessment, the Court emphasized that even though the income was disclosed in a subsequent return, the Assessing Officer could have relied on these explanations to levy a penalty. However, since the disclosed income was accepted without any attempt to evade tax, the Court found no grounds for penalty imposition. Therefore, the Tribunal's decision to delete the penalty was upheld based on the lack of error in the facts of the case.In conclusion, the High Court dismissed the tax appeal, affirming the Tribunal's decision to delete the penalty under section 271(1)(c) of the Income Tax Act.