TaxTMI 
TaxTMI 
2009 (1) TMI 537
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.... during the year. Since the assessee had claimed tax-free income of Rs. 24,84,485 citing provisions of section 14A, disallowance of proportionate interest expenses for earning the exempt income was made. Therefore, the Assessing Officer added the amount of Rs. 38,31,322 to the total income on pro rata basis of total interest expenses of Rs. 41,93,493 with respect to total investments of Rs. 6,88,89,000 out of total funds available of Rs. 7,45,01,000. Penalty proceedings under section 271(1)(c) were initiated by the Assessing Officer by issuing notice under section 271(1)(c). The Assessing Officer levied penalty of Rs. 9,21,802 being 100 per cent of the amount of tax sought to be evaded under section 271(1) (c) read with Explanation 1 of the Income-tax Act. The CIT(A) confirmed the said penalty by observing that the assessee has concealed its income and furnished inaccurate particulars of income. 4. It is submitted that the assessee company is an investment company as is adumbrated in its Memorandum of Association. While carrying out the activity the company purchases shares and grants loans. The funds required are generally borrowed from various companies. The company's inflows ....
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....der the head 'profit and gains of business' and no part should be apportioned and deducted against income assessable as dividend or otherwise. It may be noted that the assessee has claimed the interest expenditure relying on various case laws and in bona fide manner. 4.1 The explanations and submissions of the assessee are that full disclosure in respect of these additions was made in the course of assessment proceedings and/or in the computation of income and its annexures filed along with return of income. In fact all the additions were made on the basis of workings filed by the appellant with the Assessing Officer. Therefore, there cannot be any charge of concealment of income or furnishing inaccurate particulars of income which would then call into question the additions themselves. Besides all the additions are debatable legal issues and in case of most of them the appellant has filed a further appeal. 4.2 The assessee-company has also appended a note to the return of income and provided working of interest disallowance under section 14A on its own. Thus, the submission of the assessee is that there was complete and true disclosure of the facts of the case. Hence, levy o....
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....ome, imposed under the Act and the Rules thereunder. The duty is enjoined upon a person to make a correct and complete disclosure of his income and it 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). 5.2 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 sec....
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....alaries, Interests on Securities, Income from house properties (the particulars of which were to be given as per Annexure-II), Profits and gains of 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....
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....o be classified under distinct heads of income such as Salaries, Income from house property, Profit and gains of business or profession, Capital gains and Income from other sources, as enumerated in section 14. 5.4 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 obli....
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.... income is a primary obligation of the assessee. 5.5 The Assessing Officer is to give opportunity of hearing to the assessee as required under the Act. 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 ....
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....o make the total income inaccurate in particulars to the extent it does not include such income. In other words the Assessing Officer cannot invoked 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. 5.7 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 rea....
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....eptable explanation; it should not be a fantastic or fanciful one. As indicated above, the consequence follows as a matter of law. The burden is on the 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. 5.9 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 assessee 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 o....