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TMI Blog2023 (4) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... able at 30% on the addition made whereas based on the total income of the appellant tax payable would come to Rs.57,029/- and if at all penalty is being levied, the same may be restricted to Rs. 57,029 only. Hence, penalty worth Rs.1,92,717/- is required to be deleted. 3. That the C1T(A) has wrongly concluded to dismiss the appeal on basis of no response was given by the appellant during the course of assessment proceedings which is totally incorrect and baseless as all the reply to notices were filed with documentary proof. Hence penalty levied of Rs. 1,92,717 may be deleted. 4. That the appellant falls outside the tentacles of Sec 271(1 )(c) and the explanations there under based on the facts of the case and a bonafide belief that the transaction of capital gains reported in the original return of income was genuine as the same is backed by bills and necessary documents. The appellant had no knowledge about modus operandi as detected by Department and purely to buy peace of mind, the appellant had not contested the order of re-assessment. 5. That the appellant had relied on various judgements filed with submission which are overlooked by CIT(A) in rejecting the appeal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO for the income shown in the income tax return. Therefore, there cannot be any penalty under section 271(1)(c) of the Act. 8. On the other hand, the learned DR submitted that the proceedings under section 147 of the Act were initiated based on the information received from the DDIT(Inv.) Kolkata. Had there not been any information about the undisclosed income of the assessee, the income of the assessee would have gone tax free. 9. Thus, the learned DR vehemently supported the order of the authorities below. 10. I have heard the rival contentions of both the parties and perused the materials available on record. It is the settled position of law that the penalty proceedings are independent and distinct to assessment proceedings/quantum proceeding. Any addition or disallowance made under quantum proceeding does not ipso facto empower the revenue authority to levy penalty under section 271(1)(c) of the Act. In the penalty proceeding, it must be proved by the revenue based on cogent material that the assessee has either concealed income or furnished inaccurate particulars of income. In holding so we draw support and guidance from the judgment of Hon'ble Supreme Court in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference that the assessee's case is false, the Explanation cannot help the department because there will be no material to show that the amount in question was the income of the assessee. Alternatively treating the Explanation as dealing with both the ingredients (i) and ( ii) above, where the circumstances do not lead to the reasonable and positive inference that the assessee's explanation is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his part. Even in this view of the matter, the Explanation alone cannot justify the levy of penalty. Absence of proof acceptable to the department cannot be equated with fraud or wilful default. As we find no material difference between the original Explanation 1 and Explanation 1 as substituted, in our opinion, it has to be so construed as to harmonise it with basic principles of justice and fairness, as in the case of original Explanation. We are guided by the commentaries of the learned authors Kanga & Palkhiwala Law and Practice of Income-tax Vol. 1. Pages 1637, 1639 to 1640. 10.2 Taking the guidance from the ratio laid down by the Hon'ble Gujarat High Court as discussed above, we hold that pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y assessment year and thereafter, the concerned income tax authority, either the Assessing officer or the CIT(A) finds that in respect of such assessment year, such person has taxable income, then such person shall be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after expiry of the period aforesaid in pursuance of a notice u/s 148 of the Act. Vide Explanation 4, the term "the amount of tax sought to be evaded" has been defined/explained for the purpose of computation of levy of penalty. 18. A per clause (a) to Explanation 4, where the amount of income tax in respect of which particulars have been concealed or inaccurate particulars of income have been furnished, has the effect of reducing the loss declared in the return or converting that loss into taxable income, then the tax sought to be evaded will the amount which would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars of income have been furnished had such income been the total income; meaning thereby there should be a resultant effect of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished, then, as per Explanation 4, there will be no tax sought to be evaded and thereby no penalty will be leviable u/s 271(1)(c) of the Act. In our view, clause (c) to Explanation 4 is a residuary clause and can not be segregated and independently interpreted in divorce to clauses (a) or (b) of Explanation 4 to give giving it an entirely different meaning and any such an interpretation, will not be a correct interpretation of the statutory provision. A collective reading of the entire provisions of section 271(1)(c) of the Act reveal beyond doubt that what is material is the resultant addition to the taxable income of an assessee which may invite penalty under the relevant provisions of section 271(1)(c) of the Act. Though the words used in the first part, i.e. charging provision are 'Particulars' of income, however, for levy of penalty it is not the 'Particulars' of income but rather the 'quantum of income itself, that is added to the taxable income of the assessee is relevant for the purpose of calculation of the amount of penalty leviable as per the aforesaid provision. Explanation 4 to section 271(1)(c) was introduced vide Taxation Law Amendment Act, 1975. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd every fact or particulars of income such as the source of income, manner of earning of income etc., rather, the word 'explanation' here has a limited scope, whereby, it has restricted that the offering of explanation that the material fact which had been detected by the Assessing officer has a result of addition of disallowance into the income of the assessee and the assessee has no explanation that why the same be not treated as taxable income of the assessee for that relevant year. The words 'particulars of income' though in general will have a wide and broader aspect as to of the relevant particulars such as the source of income, manner of earning of income and genuineness of transaction etc., however, the second part of this section 271(1)(c) of the Act has limited the above wider scope and for the purpose of computation of penalty, stress is given on the resultant addition of an amount to the income of the assessee. The tax thereupon represents the tax sought to be evaded and the penalty can be levied upon such concealed income equal to a sum which may be 100% of 300% of the amount of tax sought to be evaded. 10.4 Thus, in view of the above detailed discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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