2013 (7) TMI 481 - HC - Income Tax

Penalty u/s 271(1)(c) - Whether the ITAT was right in confirming the order of the CIT (Appeals) in deleting the penalty u/s 271(1)(c) in respect of the gross profit addition under the head Profits and gains of business for the A.Y. 2000-01 and 2001-02 - Held that - The assessee in his assessment has stated that purchases have been made from - In order to test the veracity of the statement made by the assessee and purely relying on the sales of the company, the AO examined the proprietor of the concern - who not only denied the sale of goods but also admitted that he has furnished the bills and not the materials - In order to give an opportunity to the assessee he was allowed to cross-examine but the assessee has not chosen to do the same Court relied upon the judgement of Kamal Basha v. Deputy CIT (2009 (4) TMI 154 - MADRAS HIGH COURT ) - thus the AO has come to the conclusion that the action of the assessee comes within the meaning of concealment and that the explanation offered is inadequate and accordingly passed the order levying penalty u/s 271(1)(c)- One has to see whether the attitude of the assessee in obtaining only the bills and not the materials/goods would amount to concealment of particulars of income or furnishing of inaccurate particulars in order to attract the provisions of section 271(1)(c) appeal decided in favour of revenue.

Issues Involved:
1. Whether the Income-tax Appellate Tribunal was right in confirming the order of the Commissioner of Income-tax (Appeals) in deleting the penalty under section 271(1)(c) of the Income-tax Act in respect of the gross profit addition under the head 'Profits and gains of business' for the assessment years 2000-01 and 2001-02.

Issue-wise Detailed Analysis:

1. Facts and Background:
The assessee, a dealer in glass, mirror, and plywood, was scrutinized for the assessment years 1999-2000. During this period, the assessee made purchases from various proprietary concerns of Shri Chandrakant T. Shah and his associates. Shri Chandrakant T. Shah, in his sworn statement, stated that he had not made any sales of goods to the assessee but had only supplied bills. Consequently, the Assessing Officer rejected the assessee's books of account and completed the assessment based on the difference in the gross profit ratio, leading to the levy of penalty under section 271(1)(c) for concealment of income.

2. Appeals and Tribunal's Decision:
The assessee appealed against the penalty orders to the Commissioner of Income-tax (Appeals), who deleted the penalty, reasoning that the levy related to an addition based on the profit ratio under 'Business income,' which did not warrant penalty under section 271(1)(c). The Revenue's further appeal to the Income-tax Appellate Tribunal was dismissed, confirming the CIT(A)'s decision.

3. Revenue's Argument:
The Revenue contended that the assessee failed to furnish details of the parties from whom purchases were made and did not cross-examine Shri Chandrakant T. Shah, despite being given the opportunity. The Revenue argued that the Tribunal overlooked these vital facts and that the adoption of the gross profit ratio by the Assessing Officer did not absolve the assessee from penalty liability under section 271(1)(c) for concealing income.

4. Legal Provisions and Interpretation:
Section 271(1)(c) of the Income-tax Act deals with penalties for concealment of income or furnishing inaccurate particulars of income. Explanation 1 to this section indicates that if the assessee fails to offer a satisfactory explanation or the explanation is found to be false or not bona fide, the amount added or disallowed in computing the total income is deemed to represent concealed income.

5. Court's Analysis:
The court noted that the assessee admitted to obtaining only bills and not actual goods from Shri Chandrakant T. Shah. The assessee's failure to cross-examine Shri Chandrakant T. Shah, despite being given the opportunity, led the Assessing Officer to conclude that there was concealment of income. The appellate authority and the Tribunal's conclusion that the assessee did not intentionally and deliberately conceal income was not supported by sufficient reasoning or evidence.

6. Precedent Cases:
The court referred to the Supreme Court's decisions in Union of India v. Dharamendra Textile Processors and CIT v. Mussadilal Ram Bharose, which emphasized that section 271(1)(c) imposes a civil liability for concealment of income, and wilful concealment is not necessary for attracting penalty. The court also cited its own decision in Kamal Basha v. Deputy CIT, which reiterated that section 271(1)(c) aims to remedy revenue loss and imposes a civil liability.

7. Conclusion:
The court found that the Tribunal and the appellate authority erred in concluding that the assessee did not intentionally conceal income. Given the clear evidence that the assessee obtained only bills and not goods, the court held that the provisions of section 271(1)(c) were rightly attracted. The substantial question of law was answered in favor of the Revenue, and the tax case appeals were allowed.

Final Judgment:
The appeals were allowed, and the orders of the Tribunal and the appellate authority were set aside, reinstating the penalty under section 271(1)(c) of the Income-tax Act. No costs were awarded.

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