2019 (2) TMI 1056 - AT - Income Tax

Tribunal Overturns Penalty Under Income Tax Act, Emphasizes on Matched Income

The Tribunal ruled in favor of the assessee, setting aside the Commissioner of Income Tax (Appeals) orders and deleting the penalty levied under section ... Penalty for concealment or furnishing inaccurate particulars under section 271(1)(c) - assessment on returned income - levy of penalty contingent on assessed income exceeding returned income - 'in the course of any proceedings' construed as assessment proceedingsPenalty for concealment or furnishing inaccurate particulars under section 271(1)(c) - assessment on returned income - levy of penalty contingent on assessed income exceeding returned income - Whether penalty under section 271(1)(c) can be sustained where assessment is completed on the returned income and assessed income equals returned income. - HELD THAT: - The Tribunal found that penalty under section 271(1)(c) is levied with reference to tax sought to be evaded, which is the difference between income returned and income assessed by the Assessing Officer. Where the assessment is completed on the returned income so that the assessed income and the returned income are the same, the machinery provision for levy of penalty under section 271(1)(c) fails. The Tribunal applied this principle and relied on the reasoning in CIT vs. SAS Pharmaceuticals, wherein the phrase 'in the course of any proceedings' is construed as assessment proceedings and the question of concealment or furnishing of inaccurate particulars must be determined with reference to the return. On the facts, since the returned income equalled the assessed income despite the information about alleged bogus purchases, the statutory prerequisite for imposing penalty was absent and the levy could not be sustained.Levy of penalty under section 271(1)(c) set aside and deleted for the stated assessment years; appeals allowed.Final Conclusion: The Tribunal set aside the Commissioner (Appeals)'s confirmation of penalty and deleted the levy of penalty under section 271(1)(c) for A.Y. 2009-10, A.Y. 2010-11 and A.Y. 2011-12, allowing the assessee's appeals. Issues:1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on bogus purchases.2. Interpretation of the machinery provision for the levy of penalty when the assessed income matches the returned income.Detailed Analysis:Issue 1: The appeals by the assessee were against the orders of the Commissioner of Income Tax (Appeals) sustaining the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2009-10 to 2011-12, due to bogus purchases identified from information provided by the Sales Tax Department. The penalty amounts for the respective years were Rs. 2,97,983/-, Rs. 3,55,040/-, and Rs. 3,82,255/-.Issue 2: The Tribunal noted that the assessment was completed on the returned income, and when the assessed income aligns with the returned income, the machinery provision for the penalty under section 271(1)(c) fails. The penalty is typically based on the difference between the income returned and the income assessed by the Assessing Officer. Citing the decision of the Hon'ble Delhi High Court in the case of CIT vs. SAS Pharmaceuticals [2011] 335 ITR 259 (Del), it was emphasized that the satisfaction of concealment or furnishing inaccurate particulars must be during the assessment proceedings. The determination of concealment or inaccurate particulars should be with reference to the returned income. Therefore, based on the precedent and the relevant legal interpretation, the Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and deleted the levy of penalty, ultimately allowing the appeals by the assessee.In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the importance of the assessment proceedings and the alignment of the assessed income with the returned income in the context of levying penalties under section 271(1)(c) of the Income Tax Act, 1961.