The Tax Publishers2013 TaxPub(DT) 2014 (Karn-HC) : (2013) 053 (I) ITCL 0002 : (2013) 263 CTR 0153 : (2013) 218 TAXMAN 0423 : (2013) 092 DTR 0111

Income Tax Act, 1961

--Penalty under section 271(1)(c)--Concealment Agreed addition--During course of survey, it was found that certain payments were recorded in a rough cash book which did not contain any dates against the payments made and entries were to be made by the accountant on the next working day and as such, to buy peace with the Department, the assessee voluntarily agreed to declare the said sums towards cessation of the creditors' liabilities and that accordingly, as per the instructions of authorities, they filed revised return of income and paid taxes accordingly. In spite of that assessing officer levied penalty in terms of section 271(1)(c). The appellate authority also confirmed the levy of penalty. The Tribunal, however, accepted the explanation offered by the assessee and held that penalty cannot be levied on inference and deleted the levy of penalty. Held: Merely because the assessee agreed for addition and accordingly assessment order was passed on the basis of this addition and when the assessee has paid the tax and the interest thereon, in the absence of any material on record to show the concealment of income, it cannot be inferred that the said addition is on account of concealment. Moreover, the assessee has offered the explanation. The said explanation is not found to be false. On the contrary, it is held to be bona fide. In fact, in the assessment proceedings there is no whisper about these concealment. Under these circumstances, the entry found in the rough cash book could have been reflected in the accounts for the said financial year in which the survey took place as the last date for closing the account was still not over. The very fact that the assessee agreed to pay tax and did not challenge the assessment order, it is clear that the conduct of the assessee cannot be construed as mala fide. Therefore, the Tribunal was justified in setting aside the orders passed by the appellate authority as well as the assessing authority.

Income Tax Act, 1961, Section 271(1)(c)

Income Tax Act, 1961

--Penalty under section 271(1)(c)Concealment Validity--The assessing officer issued notice under section 271(1)(c) without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars. The Tribunal held that the notice is not in compliance with the requirements of the particular section and therefore, it is a vague notice, which is attributable to a patent non-application of mind on the part of the assessing authority. Held: The person who is accused of the conditions mentioned in section 271 should be made known about the grounds on which they intend imposing penalty on him as section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the department and show that the conditions stipulated in section 271(1)(c) do not exist, as such, he is not liable to pay penalty. Sending a printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law and hence, no penalty can be imposed on basis of such vague notice.

The penalty proceedings can be initiated on various grounds set out therein. If the order passed by the authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is (sic-are) initiated, in the notice to be issued under section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation 1(A) or in Explanation 1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in section 271 should be made known about the grounds on which they intend imposing penalty on him as the section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the department and show that the conditions stipulated in section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice are offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. [Para 59] On the basis of these observations, the Tribunal was held justified in holding that the entire proceedings are vitiated as the notice issued is not in accordance with law and accordingly justified in interfering with the order passed by the Appellate Authority as well as the Assessing Authority and in setting aside the same. [Para 64]

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT

TaxPublishers.in

'Kedarnath', 7, Avadh Vihar, Near Nirali Dhani,

Chopasni Road

Jodhpur - 342 008 (Rajasthan) INDIA

Phones : 9785602619 (11 am - 5 pm)

E-Mail : mail@taxpublishers.in / mail.taxpublishers@gmail.com