The Income Tax Appellate Tribunal (ITAT) in Chennai recently ruled on the case of V.S.J. Marketing Pvt. Ltd. Vs Deputy Commissioner of Income Tax (DCIT), concluding that failure to furnish a Return of Income is tantamount to concealing particulars of income. The Tribunal upheld a penalty under section 271(1)(c) for Rs. 140.86 Lacs for the Assessment Year (AY) 2010-11. This article provides a comprehensive analysis of the ruling and its implications.
Background: The assessee, V.S.J. Marketing Pvt. Ltd., was in appeal against the confirmation of penalty under section 271(1)(c) of the Income Tax Act. The assessee had been initially assessed on a best-judgment basis under section 144 r.w.s. 147 of the Act for not filing a return of income. The Assessing Officer (AO) estimated the income based on the peak credit in the bank accounts and levied a penalty, which was later confirmed by the Commissioner of Income Tax (Appeals).
Core Issues and Proceedings: The main point of contention was whether the assessee’s failure to furnish a Return of Income could be treated as an act of concealment of income. The assessee argued that the penalty was unjustified due to the lack of a specific charge and claimed the notice under section 271(1)(c) was vague.
However, the ITAT took into account that the assessee had not been cooperative during the assessment as well as the penalty proceedings. The Tribunal cited a similar case ruled by the Hyderabad Tribunal, which confirmed the penalty under parallel circumstances.
Legal Standpoint: The ITAT emphasized Explanation-3 to Section 271(1)(c), which clearly states that failing to furnish a Return of Income equates to concealing particulars of one’s income. The Tribunal held that the penalty was justified even though the assessee took issue with the vagueness of the show cause notice— a notice they never responded to in the first place.
Conclusion: The ITAT Chennai’s ruling in the case of V.S.J. Marketing Pvt. Ltd. Vs DCIT sets a precedent for treating the failure to file a Return of Income as a form of concealing income particulars. The case also underscores the importance of cooperation during the assessment and penalty proceedings. Ignoring notices from tax authorities and later taking shelter under procedural lapses may not help in avoiding penalties, as demonstrated by this case.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
1. Aggrieved by confirmation of penalty u/s 271(1 )(c) for Rs. 140.86 Lacs for Assessment Year (AY) 2010-11, the assessee is in further appeal before us. The impugned order has been passed by learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 16-06-2022 in the matter of impugned penalty levied by Ld. Assessing Officer [AO] u/s. 271(1 )(c) of the Act on 28-06-2019. In the penalty order, the penalty has been levied on the allegation that the assessee concealed particulars of its income. The Ld. CIT(A) confirmed the same against which the assessee is in further appeal before us.
2. The Ld. AR, at the outset, drew our attention to legal ground no.3 and submitted that in the absence of specific charge, no penalty could be levied. Reliance has been placed on the decision of this bench, the copies of which have been placed on record. The Ld. CIT-DR submitted that the assessee did not file return of income and it was clear cut case of concealment of income. Reliance has been placed on the decision of Hyderabad Tribunal in the case of Moola Padmaja vs. ACIT (ITA No.234/Hyd/2022 dated 22.02.2023 which has confirmed the penalty under similar circumstances. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.
Proceedings before lower authorities
3.1 The assessee was assessed on best judgment basis u/s 144 r.w.s. 147 of the Act on 28.08.201 8. The assessee was stated to be defunct company at the time of reopening of assessment. In response to notice u/s 148, the assessee did not file any return of income. The Ld. AO made best judgement assessment and estimated income of Rs.469.63 Lacs on the basis of peak credit in the bank accounts. In the assessment order, the penalty was levied by Ld. AO by stating that ‘Penalty proceedings u/s 271(1)(c) are initiated separately’. In the meanwhile, the assessee preferred petition u/s 264 against quantum addition which got rejected.
3.2 Subsequently, a notice u/s 271(1)(c) was issued on 28.12.2018 wherein Ld. AO alleged as under: –
“**have concealed the particulars of your income or furnished inaccurate particulars of such income.”
However, the assessee remained unresponsive and did not attend penalty proceedings. Left with no option, Ld. AO levied impugned penalty by observing that the assessee had concealed his particulars of income and the mere act of non-cooperation in all the proceedings, clearly tantamount to willful concealment of income.
3.3 During appellate proceedings, the assessee assailed the penalty on the ground that the notice was vague and an invalid notice. The Ld. CIT(A), applying the ratio of decision of Hon’ble High Court of Madras in Sundaram Finance Ltd. (403 ITR 407) in preference to the decision in Babuji Jacob (430 lTR 259), confirmed the impugned penalty against which the assessee is in further appeal before us.
Our findings and Adjudication
4. From the fact, it emerges that the assessee has remained noncooperative during assessment proceedings as well as during penalty proceeding. The assessment was framed on best judgment basis and the same has attained finality by way of rejection of assessee’s application u/s 264. The assessee did not file any return of income for this year. During penalty proceedings also, a show cause notice was issued to the assessee to defend the levy of penalty. However, the assessee did not bother to reply to the same and failed to make any submissions. Before Ld. CIT(A) as well as before us, the plea raised by the assessee is that the show cause notice was vague and an invalid notice. Thus the assessee is taking shelter on the same notice which he has not even bothered to respond during penalty proceedings. In our considered opinion, no prejudice has been caused to the assessee in such a case. The assessee has remained non-cooperative in all the proceedings. The cited case law of Hyderabad Tribunal supports the case of the revenue wherein similar fact exists. The bench, in para-23 of the order, considered Explanation-3 to Sec.271 (1 )(c) which provide that if a person fails to furnish return of income then the assessee is deemed to have concealed the particulars of his income. Accordingly it was held that it was clear case of concealment of income and penalty was justified. Even on merits, the assessee has no case since the assessment has attained finality confirming the quantum addition as made by Ld. AO. Therefore, we do not find any reason to interfere in the impugned order.
5. The appeal stand dismissed.
Order pronounced on 09th August, 2023.