Penalty leviable even if assessed income is equal to returned income.

[2010] 3 taxmann.com 99 (Mum. - ITAT)

Penalty is imposable under main provisions of section 271(1)(c) and there is no need to refer to any Explanations

·         ·        Merely because case of the assessee is not covered by any particular Explanation to section 271(1)(c), does not mean that penalty cannot be imposed when there is no difficulty in determining tax sought to be evaded

ITAT, MUMBAI BENCHES 'F' : MUMBAI

Harish P. Mashruwale HUF

v.

ACIT

ITA No. 4996/Mum/2007

March 30, 2010

RELEVANT EXTRACTS:

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6.       The assessee has challenged the levy of penalty on three grounds. Firstly, the assessee has argued that the penalty proceedings have been initiated for concealing the particulars of income but the penalty has been imposed for furnishing inaccurate particulars of income and, therefore, penalty is legally invalid. Reliance has placed on several judgments of Hon'ble High Court of Gujarat, as mentioned in Para 4 earlier. We are unable to accept the argument advanced because the Hon'ble High Court of Gujarat in the judgments cited held that penalty imposed on the ground different from the ground on which it was initiated was not proper because in such a case it could not be said that the assessee had been given reasonable opportunity of hearing in relation to the ground on which penalty had been imposed. The position in the present case is different. In this case the assessee had been given opportunity. In fact, the assessee had itself raised this ground before the Assessing Officer during the proceedings u/s 271(1)(c) and, therefore, it cannot be said that the assessee had no opportunity in the matter. Secondly, it has been argued that Explanation 1 to section 271(1)(c) and is not applicable as there is no addition to the total income and thirdly it has been submitted that the Explanation 4 relating to computation of tax sought to be evaded is also not applicable as the returned income and assessee income remained the same. On careful consideration we do not find any merit in these arguments. We agree with the view taken by the CIT (A) that the various Explanations only explain the ambiguity in the provisions relating to imposition of penalty and merely because the case of the assessee is not covered by any particular Explanation, does not mean that penalty cannot be imposed when there is no difficulty in determining tax sought to be evaded. Under the provisions of section 271(1)(c) penalty is prescribed for concealing the particulars of income or for furnishing inaccurate particulars of income and quantum of penalty is based on tax sought to be evaded. In this case, tax sought to be evaded is very clear as the tax rate applicable is 30% whereas the assessee has paid 20%. The tax sought to be evaded was because of the lower rate of tax paid and not because of any addition to the income and, therefore, provisions of Explanation 1 are not applicable. The penalty is imposable under the main provision and there is no need to refer to any Explanations. As regards the merit of the case, the claim of the assessee that amount paid for receiving the gift was from the cash received on surrender of tenancy right is not supported by any evidence. The gifts had also been received much before the surrender of tenancy. The amount has therefore been rightly assessed as income from other sources attracting tax rate of 30 %, which has also been affirmed by the Tribunal in the quantum appeal. The assessee has sought to evade tax by paying tax at lower ate. The penalty in our view is imposable as held earlier under the main provisions of section 271(1)(c).

7.       In view of the foregoing discussion, we see no infirmity in the order of CIT (A) in confirming the penalty and the same is, therefore, upheld.