Tuesday, June 7, 2011

Penalty under s 271(1)(c)

Furnishing of inaccurate particulars in return attract penalty under s 271(1)(c).
Findings in assessment proceedings constitute good evidence in the penalty proceeding, but the authorities must consider the matter afresh.
The initiation of penalty proceedings cannot be set aside only on the ground that the assessment order states “penalty proceedings are initiated separately, if otherwise it conforms to the parameters set out”.
A search and seizure operation was conducted at the premises of the appellant, the Director of the assessee-company, and certain documents were seized. A notice under s 158BC was issued against the assessee-company and additions were made. The assessee’s plea that an imprest amount was given to the Director, which was spent by him was rejected by the CIT(A) and the Tribunal and the additions were upheld. The AO also imposed a penalty under s 271(1)(c). In an appeal, the CIT(A) deleted the penalty imposed by the AO on the ground that the AO was not justified in levying penalty merely on the ground that the additions have been upheld by the Tribunal. In an appeal, the Tribunal upheld the penalty. Being aggrieved, the assessee has filed the present appeal.
The issue is whether the Tribunal was justified in levying a penalty under s 271(1)(c) on the ground that the assessee has furnished inaccurate particulars.
A mere omission or negligence would not constitute a deliberate act of suppressio veri or suggestio falsi. In order to be covered within the proviso of cl (c) of sub-s (1) of s 271, there has to be a concealment of particulars of income by the assessee or the assessee must have furnished inaccurate particulars of income. An incorrect claim may not amount to the furnishing of inaccurate particulars. Everything depends upon the return filed by the assessee because that is the only document where the assessee can furnish the particulars of his income. When such particulars are furnished inaccurately, the liability would arise. To attract a penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Mere making of a claim, which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee and such a claim cannot amount to the furnishing of inaccurate particulars.
The order imposing a penalty is quasi-criminal in nature and the burden lies on the Department to establish that the assessee had concealed his income or furnished inaccurate particulars. The findings in the assessment proceedings constitute good evidence in the penalty proceeding, but the authorities must consider the matter afresh. The prima facie satisfaction of the AO that the case may deserve the imposition of a penalty can be discerned from the order passed during the course of the assessment proceedings. The initiation of penalty proceedings cannot be set aside only on the ground that the assessment order states “penalty proceedings are initiated separately, if otherwise it conforms to the parameters set out”.
In the instant case, from the order of the authorities below in the quantum proceedings and also the order in the penalty, all the authorities have recorded the plea of an imprest amount of the assessee as an afterthought. The explanation furnished by the assessee was evidently found to be false. The AO had recorded prima facie satisfaction that the unexplained amount of expenditure recorded in the seized document was the unexplained income. It could not be said to be a mistake committed by the assessee in not making entries for such a long time. It was a clear case of furnishing inaccurate particulars of the income by the assessee.

A mere omission or negligence would not constitute a deliberate act of suppressio veri or suggestio falsi for imposition of penalty — as held by DelHC in Astra Housing & Investment P. Ltd v CITIn favour of: The Revenue ; ITA No. 622/2008
Decided on: 3 June 2011

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