2009 (4) TMI 154 - HC - Income Tax

Court upholds penalty under Income Tax Act for assessment year 2003-04 despite appellant's inconsistent stance

The Court upheld the penalty imposed under section 271(1)(c) of the Income Tax Act on the appellant for the assessment year 2003-04. Despite the ... Penalty for concealment of income – rejection of sundry creditors - The Assessing Officer brought to tax the sundry creditors under Section 41(1) of the Act and initiated penalty proceedings under section 271(1)(c) of the Act. The Assessing Officer, after considering the reply of the assessee dated 02.02.2006, rejected the plea of the assessee that the additional income was offered voluntarily in order to buy peace and should not be construed as concealment of income and or furnishing of inaccurate particulars of income. – held that - the assessee's attitude before the officer is inconsistent and even the inconsistent stand could not be established with the supportive evidence or materials - penalty under section 271(1)(c) of the Act is attracted in this case Issues:1. Whether the levy of penalty under section 271(1)(c) of the Income Tax Act is justified in the case of the appellantRs.2. Whether the approach of the assessee in offering additional income voluntarily justifies the rejection of penalty impositionRs.3. Whether the Tribunal's decision to sustain the penalty under section 271(1)(c) is legally sustainableRs.Analysis:1. The case involves an appeal by the revenue against the order of the Income Tax Appellate Tribunal regarding the assessment year 2003-04. The Assessing Officer added an amount to the income of the assessee under Section 41(1) of the Act, leading to penalty proceedings under section 271(1)(c). The Commissioner of Income Tax (Appeals) deleted the penalty, but the Tribunal upheld it, leading to the current appeal. The key issue is the justification of the penalty under section 271(1)(c) in this context.2. The appellant contended that the additional income offered voluntarily should not lead to penalty imposition. However, the Court found that the assessee's inconsistent stands and failure to substantiate claims before the authorities did not support this argument. The Court highlighted that the plea of offering additional income voluntarily was made only after scrutiny by the department, indicating a lack of substantiation. The failure to provide necessary evidence regarding defective goods and remission further weakened the appellant's case.3. The Court referred to the decision in Union of India vs. Dharmendra Textiles Processors, emphasizing that the existence of dishonest intention is not necessary for penalty imposition under section 271(1)(c). The Court concluded that the appellant's inconsistent attitude and lack of supporting evidence rendered the penalty justified. Citing the strict liability element in the explanation to Section 271(1)(c), the Court held that any concealment falls within the purview of the penalty provision. Ultimately, the Court dismissed the appeal, finding no merit in challenging the penalty imposition under section 271(1)(c) based on the facts and legal precedents discussed.