Thursday 5 December 2013

S. 271(1)(c) penalty cannot be levied if the assessee discharges the primary burden by a cogent explanation and onus shifted on the AO is not discharged.


Facts:  There was a search conducted under Section 132 of the Act, and in which it was revealed that in a real estate dealings, there were "on-money" transactions and cash of Rs.27,00,000/- was seized. The assessee offered to admit the "on-money", but claimed that it was taxable only on completion of the projects under the 'completed contract method'. The assessee’s claim was rejected by all the authorities including the High Court.

 

Penalty proceedings were also initiated under Section 271(1)(c) of the Act. Against which, the assessee claimed that there was a mistake in the entries regarding the sale of flats to J.B. Exports in as much as the rate at which the property was shown as sold to the said party was much higher than the rate at which the property was sold to other parties. The AO and CIT(A) rejected the claim but the Tribunal accepted it on the basis that the huge difference in the rate of sale of the flat recorded in other cases and in the case of J.B. Exports supported the assessee’s contention that there may be a mistake in recording the rate. It held that as the department had failed to prove concealment without any doubt, penalty could not be imposed. The department preferred an appeal to High Court.

 

HELD in favour of assessee:

Firstly, it is to be stated that the findings recorded by the Tribunal is a finding of fact. Therefore, unless it is shown that such finding is perverse, the same cannot be interfered, while considering an appeal which can be entertained only on a question of law.

 

Further, merely because the assessment proceedings have been confirmed does not automatically mean that penalty u/s 271(1)(c) is justified.

The Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Reliance Petroproducts Pvt., Ltd., reported in [2010] 322 ITR 158 (SC) pointed out that a “mere making of a claim, which is not sustainable in law, by itself, would not amount to furnishing of inaccurate particulars regarding the income of the assessee.”

 

The Hon’ble SC in the case of Mak Data P. Ltd., vs. Commissioner of Income Tax-II), held that the question would be whether the assessee had offered an explanation for concealment of particulars of income or furnishing inaccurate particulars of income and the Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer between the reported and assessed income.

The burden is then on the assessee to show otherwise, by cogent and reliable evidence and when the initial onus placed by the explanation, has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted their income and not otherwise.

 

On facts, the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation. If the department did not agree with the explanation, then the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income. In the instant case, such onus which shifted on the department has not been discharged. In the circumstances, we do not find that there is any ground for this Court to substitute our interfere with the finding of the Tribunal on the aspect of the bonafides of the conduct of the assessee.

 
CA Rahul Jain
rahuljain@rpmd.in

No comments:

Post a Comment