TaxTMI 
TaxTMI 
2009 (1) TMI 526
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....section 271(1)(c). The CIT(A) sustained the penalty with a finding that the assessee has concealed its income and furnished inaccurate particulars of income. 4. We have heard the learned representatives of the parties and record perused. The Assessing Officer levied penalty under section 271(1)(c) on the ground that the assessee has claimed interest expenditure of Rs. 42.55 lakh. Interest paid on loan taken for the purpose of construction business. The said expenditure was disallowed on the ground that the assessee did not start/commence the construction business. The learned DR has relied upon the judgment of the Hon'ble Supreme Court in the case of Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277^1 which has distinguishable on facts as in that case it has been held that Mens rea is not an essential ingredient of section 271(1)(c) and there is no discretion with the authority competent to impose penalty to levy penalty below the prescribed minimum. In this regard, it is relevant to state that the matter of penalty under section 271(1 )(c) is required to be decided on facts of each case. 4.1 The crux of the matter to be examined is whether penalty under sect....
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....t is only when he fails in his duty by not disclosing his income or part thereof, he conceals the particulars of his income. The duty is enjoined upon him to make a complete disclosure of his income as well as a correct disclosure. Therefore, if the disclosure made of the particulars of income is incorrect, then also he commits breach of his duty. Such defaults entail the penal consequences contemplated by section 271(1)(c)( iii). 4.3 That in return of income, an assessee is required to furnish particulars and accounts on which such return income has been arrived at. These may be particulars as per its books of account, if it has maintained them, or any other basis upon which it had arrived at the returned figure of income. Any inaccuracy made in such books of account or otherwise which resulted in keeping off or hiding a portion of its income is punishable as furnishing inaccurate particulars of its income. Let us examine what are the duties of assessee under the Act and Rules to disclose thereunder particulars of income. Under section 139(1) of the Act wherein, it was, inter alia, provided that every person, if his total income in respect of which he is assessable under the Ac....
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....business or profession (the particulars of which were to be given as per Annexure II), Capital gains and Income from other sources. The aggregate of Item Nos. 1 to 6 was to be shown against Item No. 7. Thereafter, deductions specified below Item 7 were to be made in respect of brought-forward loss of earlier year and the balance was to be struck from which amount deductible under Chapter VI-A of the Act and the amount of annuity deposit were to be deducted, leading to the figure of the total income. In Part-II, deductions under Chapter VI-A were to be enumerated for working out the total deduction, which was to be carried to Part I. In Part III of the return, statement of sums included in total income in respect of which income-tax is not payable or which qualify for debate or deduction of income-tax, was to be furnished with the required particulars. In Part IV, sums which are not included in Part I and claimed to be not taxable were to be stated. The statement of tax deducted at source and advance tax paid was to be furnished at Part V, giving particulars of the advance tax paid against salaries, interest on securities, other interest, dividends and any other income. Statement of....
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....s and Income from other sources, as enumerated in section 14. 4.5 The income chargeable to income-tax under the head 'Salary' is the nature of the income indicated in section 15 to be computed after making the deductions mentioned in section 16. The income under the head 'Income from house property' under section 22 is to be computed after making deductions mentioned in section 24. The income chargeable under the head 'Profits and gains of business or profession' is to be computed in accordance with the provisions contained in sections 30 to 43A as provided in sections 28 and 29 thereof. The income chargeable under the head 'Capital gains' is required to be computed after making deductions under section 48. Finally, the income chargeable under the head 'Income from other sources' is to be computed after making the deductions mentioned in section 57. Thus, under each head of income, there are provisions for deductions which are to be made while computing the income chargeable under that head. It, therefore, follows that it is an obligatory duty cast upon a person filing the return of income to disclose all his income derived from any source under various heads and indicate the in....
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....ct. Section 274 of the Income-tax Act, 1961 provides that no order imposing a penalty under this Chapter would be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. The opportunity of hearing given by the notice under section 271(1)(c), obviously is against such concealment and inaccuracy as is detected in the assessment proceedings. This is to ensure that the assessee gets an adequate opportunity in respect of the default which is detected and alleged against him and which forms the basis of the issuance of the notice under section 271(1)(c) and to ensure that he is not put to peril of answering against something which never was specifically determined as his default or in respect of which no notice was issued by the ITO, whose satisfaction alone mattered at the stage of the initiation of the penalty proceedings. Whether the burden of proof in a given case has been discharged on a set of facts is a question of fact. There was concealment or not is, ordinarily, a question of fact. Once bearing in mind the correct principles comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact. Similarly, w....
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.... provision of section 271(1)(c) on the basis routine and general presumptions. Whether it be a case of only concealment or of only inaccuracy or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceedings by the ITO, who on being satisfied about each concealment or inaccuracy of particulars of income would be in a position to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected. 4.8 In addition to main provisions of concealment "has concealed the particulars of his income" or "has furnished inaccurate particulars of such income" there are deemed to represent the income in respect of which particulars have been concealed. The deemed concealment is provided in explanations. Often a question arose whether in cases where additions or disallowances made by the ITO the penal provisions of section 271(1)(c) would attract. Explanation 1 takes care of this situation. The Explanation to section 271(1) of the Act reads as under :- Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A....
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....assessee. If he fails to discharge that burden, the presumption that he had concealed the income or furnished inaccurate particulars thereof is available to be drawn. 4.10 Part A of the Explanation to section 271(1)(c) provides that if assessee fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false. This explanation can therefore, be applied only where the assessee has either not offered any explanation or where he has offered any explanation, the same found to be false by the ITO etc., in other words, where the assessee offers some explanation, it is only the proving by the Assessing Officer of the explanation to be false, that Part A of the Explanation may be attracted. Mere non-acceptance of explanation offered by the assessee cannot form a basis for the satisfaction of ITO to the effect that the assessee has concealed particular of his income. The ITO must have some definite evidence to refuse the assessee's claim or evidence or explanation. 4.11 The essence of Part B of the Explanation is that the person must provide an explanation which is bona fide and he should substa....