2015 (1) TMI 1522 - AT - Income Tax

Penalty under Section 271(1)(c) not justified if income disclosed in revised return for another year

Arvind Gupta Versus Income Tax Officer, Ward 2 (1), New Delhi.

Arvind Gupta Versus Income Tax Officer, Ward 2 (1), New Delhi. - TMI ISSUES: Whether the imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 is justified where income was not disclosed in the original return but was subsequently offered to tax in a revised return for a different assessment year.Whether concealment penalty can be imposed when the income was disclosed following information received under Exchange of Information (EoI) arrangements and the revised return was filed beyond the time limit prescribed under section 139(5).Whether penalty proceedings can be sustained for an assessment year when penalty proceedings for the same facts and income in another assessment year have been dropped by the Assessing Officer.The legal effect of shifting income from one assessment year to another in reassessment proceedings on the applicability of concealment penalty under section 271(1)(c). RULINGS / HOLDINGS: The penalty under section 271(1)(c) cannot be upheld for the assessment year in question since the income was first disclosed in a revised return filed within the permissible period for that assessment year (2004-05), and the present proceedings merely shifted the income to an earlier assessment year where the time for filing a revised return had expired; thus, no concealment of income occurred in the present assessment year. The Court emphasized that 'penalty cannot be justified on the basis of some facts... which have not come to the light in the relevant quantum proceedings'.The fact that the income was disclosed only after confrontation with information received under EoI arrangements does not render the disclosure voluntary or in good faith, but this alone does not justify penalty imposition if the disclosure is made within the legally prescribed time for the relevant assessment year.Penalty proceedings cannot be sustained for one assessment year when on materially identical facts and the same income, penalty proceedings have been dropped for another assessment year; the Court held that 'once this happens and no distinguishing features... are pointed out, for this reason alone, penalties imposed are not sustainable in law'.The concealment penalty under section 271(1)(c) requires that the Assessing Officer or appellate authorities be 'satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income' in the course of the relevant proceedings; here, no concealment was found vis-à-vis the reassessment proceedings for the assessment year 2003-04. RATIONALE: The Court applied the statutory framework of the Income Tax Act, 1961, particularly sections 139(5), 147, and 271(1)(c), and relied on the principle that penalty proceedings must be linked to concealment detected in the relevant assessment or reassessment proceedings.It noted the limitation period for filing revised returns under section 139(5) as a critical factor, observing that the assessee could not revise the return for the assessment year 2003-04 after the expiry of the prescribed period and therefore disclosed the income in the next available year (2004-05).The Court referred to precedent emphasizing consistency in penalty imposition across assessment years with similar facts and rejected contradictory stands by the revenue authorities.The judgment refrained from deciding on the broader question whether non-disclosure of income revealed through EoI arrangements justifies penalty under section 271(1)(c), as the technical grounds sufficed to set aside the penalty.