2016 (9) TMI 800

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....see has filed his return of income on 30.9.2008 declaring an income at Rs. 38,88,470/-. The assessee at the relevant time was running an orthopedic nursing home. His case was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. A perusal of the balance sheet, it revealed to the AO that the assessee has shown sundry creditors to the tune of Rs. 10,11,020/- and salary payable at Rs. 71,434/-. On further inquiry, it revealed to the AO that the assessee has been following mix accounting system. For expenses, he has followed mercantile system of accountancy and for income he has been following cash system. The ld.AO has made reference to section 145 of the Income Tax Act and observed that sub-....

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.... N Suthar 22,000/- + Vishwas Construction 54,000+ D Seven Advertising 65,0007-) on which TDS has not been made is being disallowed and added back to assessee's income. (Addition: Rs. 1,41,000/-)" 4. The AO, thereafter, initiated penalty proceedings and issued notice under section 274 r.w.s. Section 271(1)(c) of the Income Tax Act. After hearing the assessee, the ld.AO has imposed penalty of Rs. 3,47,727/-. Appeal to the ld.CIT(A) did not bring any relief to the assessee. 5. The ld.counsel for the assessee contended that penalty was initiated for furnishing inaccurate particulars of income, whereas, it has been imposed for concealing of income. On the strength of Hon'ble Karnataka High Court decision in the case of CIT Vs. Manjunat....

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.... 7. With the assistance of the learned representatives, we gone through the record carefully. Section 271(1)(c) of the Income Tax Act, 1961 has direct bearing on the controversy. Therefore, it is pertinent to take note of the section. "271. Failure to furnish returns, comply with notices, concealment of income, etc. (1) The Assessing Officer or the Commissioner (Appeals) or the CIT in the course of any proceedings under this Act, is satisfied that any person (a) and (b)** ** ** (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty. (i)and (Income-tax Officer,)** ** ** (iii) in the cases referred to in Clause (c) or ....

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....enalty imposed under this section can range in between 100% to 300% of the tax sought to be evaded by the assessee, as a result of such concealment of income or furnishing inaccurate particulars. The other most important features of this section is deeming provisions regarding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation-1 to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total inco....