Income Tax : The Tribunal held that penalty under section 271(1)(c) cannot be imposed when errors are voluntarily corrected during assessment. ...
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Income Tax : The Committee recommends that the scope of Section 273B should be suitably enlarged to provide that penalty for concealment of inc...
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Longstanding and never ending has been the debate regarding what is penalty and whether mens rea is an essential ingredient in levy of penalty or bonafide belief that what was being done was correct would hold good and save the offender from penalty. Over the years the law has evolved and Courts of Law have tried to lay down a law providing clarity in this regard.
Delhi High Court in the case of CIT vs. M/s Jain Export Private Ltd. held that, to initiate proceedings under Section 271(1)(c), it requires proper investigation and higher satisfaction of proof, which confirmed the basis for the initiation of necessary proceedings.
Both assessee and revenue are in appeal against the action of deletion of penalty u/s 271AAA. CIT (A) has deleted part of penalty levied but another part of the penalty was retained by him. Assessee is in appeal against the retention order and revenue is against the deletion of penalty.
Assessee is not liable to penalty u/s 271(1)(c) of the I.T. Act since the same was not based on any incriminating material found during the course of search. The addition was based on the basis of loan creditors found from the balance sheet already filed prior to the search along with the original return of income.
We find that it is not in dispute that the undisclosed bank account which was detected by the department contains transfer entries to other 5 undisclosed bank accounts maintained by the assessee. In view of this fact the Tribunal concluded that the subsequent disclosure of the assessee of existence of the said 5 bank accounts cannot be held as voluntary.
However, it is a well-settled proposition that the quantum of penalty proceedings are separate proceedings and penalty cannot be imposed merely on the ground that the assessee did not challenge or agitate the issue before higher forum and accepted the disallowance made by the AO.
Though in these case the appeal in quantum was decided in favour of the assessee and thereby penalty u/s 271(1)(c) was deleted, there are also cases where the appeal in quantum was decided by Tribunal against the assessee and the appeal was pending before High Court for disposal but High Court had admitted the appeal, even in that case, it was decided by Delhi Tribunal that penalty u/s 271(1)(c) cannot be levied being debatable issue
It is well settled that the parameters of judging the justification for addition made in the assessment case of the assessee is different from the penalty imposed on account of concealment of income or filing of inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment
Income Tax law provides an exhaustive, encyclopedic and compendious machinery to deal with the issues of what can be conceived and what can be believed with regard to the jurisprudence of taxing the subject as a whole. In this profitable and solvent venture of taxing the subject through the route of his due filings with the respective authorities and agencies designated and deputed by the government
The Hon’ble Calcutta High Court in case of Durga Kamal Rice Mills Vs. CIT (2004) 265 ITR 25 (Cal.) has held that quantum proceedings are different from penal proceedings. The Hon’ble Kerala High Court in CIT Vs. P.K. Narayanan (1999) 238 ITR 905 (Ker.) has held that despite the addition being confirmed by Tribunal in quantum proceedings, the penalty can still be deleted by the Tribunal, if the facts justify.
