Commissioner of Income tax II, V. Shri N.Laxman Rao,

ITTA/565/2013

AI Insights

The case involves an appeal by the Commissioner of Income Tax-II, Hyderabad against the decision of the Income Tax Appellate Tribunal, which set aside the penalty imposed on N. Laxman Rao and others under Section 271(1)(c) of the Income Tax Act for the assessment year 2002-2003. The main legal questions pertained to the justification of the Tribunal in setting aside the penalty and the burden of proof regarding conscious concealment of income. The High Court examined whether the Tribunal correctly applied the law in light of the facts presented, particularly focusing on the interpretation and application of Explanation 1 to Section 271(1)(c) of the Act.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 737218 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 20-11-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Concealment of income; Estimate basis; Inaccurate particulars; Penalty
• Section: 271(1)(c)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR INCOME TAX TRIBUNAL APPEAL NO.565 OF 2013 DATED:20.11.2013 Between: Commissioner of Income Tax-II Hyderabad … Appellant And N. Laxman Rao and others … Respondents THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.565 OF 2013 JUDGMENT: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be preferred against the judgment and order of the Tribunal, dt.28.8.2009, in relation to assessment year 2002-2003 and is sought to be admitted on the following suggested questions of law: (A) “Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in setting aside the penalty imposed under Section 271(1)(c) of the Income Tax Act? (B) Whether the Appellate Tribunal is justified in placing burden of establishing, on the revenue, by conclusive evidence that there has been conscious concealment of income by the assessee for the purpose of imposing penalty under Section 271(1)(c) of the Income Tax Act, overlooking explanation 1 to Section 271(1)(c) of the Income Tax Act? (C) Whether the finding of the Appellate Tribunal that there was no fraud or gross or wilful neglect to return the correct income by the assessee can be said to be based on material on record?” 2. Learned counsel for the appellant submits that the learned Tribunal has ignored the explanation 1 to Section 271(1)(c) of the Income Tax Act (for short, ‘the Act’). Had the aforesaid provision been applied, the penalty proceedings would have been justified. 3. We are unable to accept the contention of the learned counsel for the appellant. The explanation 1 to Section 271(1)(c) of the Act, reads as follows: “Explanation 1.- Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section be deemed to represent the income in respect of which particulars have been concealed.” 4. On a plain reading of the aforesaid explanation, it appears that if the assessee offers an explanation, which he is not able to substantiate and fails to prove such explanation is bona fide, then penalty proceedings would have been justified. Here the learned Tribunal on fact found as follows: “Adverting to the fact of the case, there is no evidence available with the department which could show conclusively said the assessee had, in fact, concealed the income and assessee having furnished inaccurate particulars of income. Therefore, in any case, the addition has been made because the explanation has not been found satisfactory. B u t such explanation could not be considered as false or mala fide. Moreover, in our opinion, an addition has been made on estimate basis only by assuming a portion of deposits made in the bank accounts of the assessee as income of the assessee. The fact of the concealment of income or furnishing inaccurate particulars of income has not been proved conclusively.” (emphasis supplied) 5. In view of the aforesaid fact finding, we are to conclude that the pre-conditions mentioned in Section 271 of the Act for initiating penalty proceedings are not satisfied. Moreover, we are of the view that when income is estimated by the revenue officials, there is no scope for concealment of income or furnishing of any inaccurate particulars, for whatever particulars furnished, are deemed to have been accepted by the revenue officials and thereafter estimate has been made, and in such circumstances where is the scope for concealment of income or furnishing of inaccurate particulars? 6. In view of the aforesaid discussion, we dismiss the appeal. There will be no order as to costs. ________________________ K.J. SENGUPTA, CJ ______________________ SANJAY KUMAR, J 20.11.2013 bnr "