2013 (7) TMI 620 - HC - Income Tax

Concealment of income – imposition of penalty - Whether the Tribunal was correct in holding that there was no concealment of income and there was no cessation of liability but it was on assesses agreement additions have been made and therefore no penalty is attracted despite there being no evidence to substantiate such a conclusion and consequently recorded a perverse finding – Held that:- The conduct of the assessee cannot be construed as malafide - the Tribunal was justified in setting aside the orders passed by the Appellate Authority as well as the Assessing Authority - In so far as the imposition of penalty is concerned it is not in accordance with law - No fault could be found with the Tribunal for deleting the penalty - 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 - the assessee has offered the explanation - The said explanation is not found to be false - On the contrary it is held to be bonafide - 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 assessee agreed to pay tax and did not challenge the assessment order – decided in favor of assesse.

Validity of notice u/s 271(1)(c) - Whether the notice issued under Section 271(1)(c) in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal and the proceedings initiated by the Assessing Authority was legal and valid – Held that:- The Tribunal was justified in holding that the entire proceedings are vitiated as the notice issued is not in accordance with law – thus justified in interfering with the order passed by the Appellate Authority as well as the Assessing Authority and in setting aside the same - Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271 - Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision – decided in favour of assessee.

Penalty proceedings - Whether the Tribunal was justified in holding that the basis for initiation of the penalty proceedings is the satisfaction of the Appellate Authority in coming to a conclusion based totally on a different ground other than the ground on which the Assessing Authority had passed the assessment order and the proceedings initiated by the Assessing Authority was legal and valid – Held that:- the subject matter of the penalty proceedings is the order of the Appellate Authority and not the order passed by the Assessing Authority – the penalty proceedings are initiated by the Assessing Authority initially on the basis of his assessment order - the Appellate Authority deleted the additions made under Section 69 of the Act by the Assessing Authority - he sustained additions under new grounds under valuation of the closing stock - the finding recorded by the Appellate Authority - the Assessing Authority in the penalty proceedings took note of the Appellate order and suitably amended the penalty proceedings and proceeded further in the matter and then imposed penalty – decided in favour of assesse.

When the two fact finding authorities have concurrently held that the explanation offered by the assessee is not false, though the assessee has failed to conclusively prove the explanation offered, does a case is made out for interference – Held that:- The explanation offered by the assessee is not false and it is a bonafide one though the assessee has failed to conclusively prove the explanation offered – there was no justification to interfere with the well considered order passed by the Tribunal – decided in favour of assesse.