2023 (1) TMI 832 - AT - Income Tax

Assessee appeals allowed, penalties deleted under Income Tax Act

The Tribunal allowed the appeals of the assessee in both assessment years, directing the deletion of penalties imposed under section 271(1)(c) of the ... Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - benami ownership / benami transaction - fact of same income being offered to tax by a different entity as a relevant factor in penalty proceedings - survey under section 133A and consequent verification - assessment completed in the hands of a third partyPenalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - fact of same income being offered to tax by a different entity as a relevant factor in penalty proceedings - benami ownership / benami transaction - assessment completed in the hands of a third party - Whether penalty under section 271(1)(c) can be sustained against the assessee for alleged concealment of income claimed to belong to M/s Chandan Carrier when that same income had been offered to tax and assessed in the hands of another person. - HELD THAT: - The Tribunal observed that the income sought to be taxed in the assessee's hands had already been offered to tax and assessed in the hands of Shri Nilesh Shah, proprietor of M/s Chandan Carrier. While the Assessing Officer and lower authority treated the firm as effectively held by the assessee and imposed penalty on that basis, the Court noted the legal principle, as articulated by the Gujarat High Court in Patel Chemical Works, that in penalty proceedings the fact of the very same income having been offered to tax and substantially taxed in the hands of a different entity is a relevant factor in deciding whether concealment or furnishing of inaccurate particulars has occurred. Applying that principle to the facts, and having regard to the completed assessment in the name of Shri Nilesh Shah and the materials produced by the assessee, the Tribunal concluded that imposition of penalty in the assessee's case was not justified. Consequently, the penalty was deleted. The reasoning was applied consistently for both assessment years, as the facts and issues were common. [Paras 6, 7, 9]Penalty under section 271(1)(c) deleted; appeals allowed.Final Conclusion: The Tribunal allowed the appeals for AY 2006-07 and AY 2007-08 and directed deletion of the penalty under section 271(1)(c) in view of the fact that the impugned income had already been offered to tax and assessed in the hands of another person, making penalty not sustainable on the facts. Issues Involved:- Penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2006-07 and 2007-08.Analysis:Assessment Year 2006-07:1. The case involved the imposition of a penalty of Rs.36,320 under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer (AO) added a sum of Rs. 1,07,890 in the hands of the assessee, alleging that the assessee was the benami owner of a transport business named M/s Chandan Carrier. The AO further imposed the penalty for concealing the particulars of income received from M/s Chandan Carrier. The CIT(A) confirmed the penalty, stating that the appellant was the actual owner of M/s Chandan Carrier, and the income had already been taxed in the hands of another individual. The appellant contended that the income in question had already been assessed in the name of the actual proprietor of M/s Chandan Carrier, Shri Nilesh Shah. The appellant relied on the case of Patel Chemical Works v. Assessing Officer to support this argument. 2. The Tribunal observed that the income sought to be taxed in the hands of the assessee had already been offered for taxation in the hands of Shri Nilesh Shah. Citing the decision of the Gujarat High Court in the Patel Chemical Works case, the Tribunal held that when the same income has been substantially taxed in the hands of another entity, it is a relevant factor in penalty proceedings. Therefore, the Tribunal concluded that the penalty under section 271(1)(c) should be deleted as the income in question had already been taxed in the hands of the actual proprietor of M/s Chandan Carrier.Assessment Year 2007-08:1. The penalty of Rs.67,610 imposed by the AO under section 271(1)(c) for this assessment year was also challenged by the assessee. Since the facts and issues were common for both years, the Tribunal directed that the penalty imposed for this year should also be deleted.Conclusion:In both assessment years, the Tribunal allowed the appeals of the assessee, directing the deletion of the penalties imposed under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal emphasized that when the same income has been taxed in the hands of another entity, it is a relevant factor in penalty proceedings, leading to the decision to delete the penalties in both cases.