HC: Penalty Not Imposable U/S 271(c) in Absence of Wrong Details

The Madhya Pradesh High Court ruled that penalty u/s 271(c) of the Income Tax Act, 1961 shall not be levied in the absence of intentional concealment and false details.

The respondent company M/s S Kumar Tyres Manufacturing co. ltd. was made in the year 1985 and has the business of manufacturing of tyers and trading of fabrics. The respondent furnished the Income tax return dated 31/12/1992 which shows the loss of Rs. 1,02,86,772 with a Tax Audit Report both for the Tyer Division and Fabric Division. In the course of assessment proceedings, the taxpayer has offered an income of Rs.4,64,164 on the basis of a power subsidy and an addition of Rs.12,33,469 on the basis of interest subjected to be paid to the financial institution.

The taxpayer opposes that the amount was obtained on the end of rights and claims via the foreign collaborator and displays in the Income Tax Return as capital receipt.

The petitioner resists that the respondent has intentionally displayed the receiving of the amount as a capital receipt, also he mentioned that the respondent was securing the knowledge of the original sort of transaction, in the nature of the damage along with that the receipt, is required to be correctly mentioned in the returns, hence the taxpayer file the wrong particulars of the income via trying to classify them as a capital receipt.

The HC Bench comprises of Justice Vivek Rusia & Justice Amar Nath (Kesharwani) sees their intentional attempt to conceal the income particular or file the wrong particulars which do not incur the respondent guilty of any breach that produces in the penalty levied under Section 271 (1) (c) of the Income Tax Act.

The same would be found that as the respondent was complying with the mercantile system, hence the receipt of Rs 2,29,50,782 resulted in the respondent’s account in the AY 1992-93 however it was revealed in the AY 1993-94, hence there was no event to show the receipt in the return of AY 1992-93.

For drawing the provision of section 271 (1)(c) the satisfaction would be recorded, and the taxpayer hides the particulars of his income or files the wrong particulars of the income. The respondent shows the income source as a capital receipt and the receipt source of the amount of Rs 5,18,02,396 via Michelin Company is displayed in the correct way. The same may be on the grounds of the choice to provide through the tax consultant or Chartered Accountant, the same as specified in the capital receipt in the return which was a problem.

The HC articulated that “The Appellate Tribunal of Income Tax has not committed any error while setting aside the order passed by the Assessment Officer as well as CIT in respect of the imposition of penalty under Section 271 (1) (c) and dismissed the petition.”