ITAT upholds Penalty u/s 271(1) (c) When Assessee failed to make Full and True Disclosure of the facts in Income Tax Return [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) upheld the Penalty under section 271(1) (c) of the Income Tax Act, 1961 when the assessee failed to make full and true disclosure of the facts in the Income Tax Return.

Sabara Impex Ltd., the assessee filed its return of income on 0112-1997 declaring total income at Rs 22,40,430/-. A survey was conducted by DDIT in the case of M/s Geekay Exim India Ltd. During the course of the survey, it was found that various concerns of the group were engaged in fictitious trading of pharmaceutical goods without actual delivery. A statement u/s 131 was recorded of Shri Rais Ahmed, director of M/s Geekay Exim India Ltd. Shri Rais Ahmed is also a director in the assessee company. 

All the goods purchased by the assessee were sold to one single party M/s Ebers Pharmaceuticals Ltd. These purchases and sales were not supported by any delivery challans or proof of transportation. No payments had been made for these purchases and no confirmation was submitted for sundry creditors in respect of the above-mentioned parties.

There can be no dispute about the proposition that the penalty proceedings are different from assessment proceedings and mere addition in quantum proceedings would not ipso facto result in the imposition of a penalty.

It was viewed that as the assessee had not disclosed all details in the return of income and the claim of the assessee was not sustainable in law amounting to the furnishing of inaccurate particulars or concealment of income on the part of the assessee.

 The various explanations to section 271(1)( c) only explain the ambiguity in the provisions relating to imposition of penalty and merely because the case of the assessee was not covered by any particular explanation, it did not mean that penalty could not be imposed when there is no difficulty in determining the tax sought to be evaded.

Under the provisions of section 271(1) of the IT Act, the penalty is prescribed for concealing the particulars of income or for furnishing inaccurate particulars and the quantum of penalty is based on the tax sought to be evaded.

A Coram comprising of Shri Vikas Awasthy, Judicial Member and Shri Gagan Goyal, Accountant Member observed that the assessee has filed inaccurate particulars of income at the time of filing the return to conceal its income and the provisions of section 271(1)(c) is attracted in the assessee’s case While filing the return of income, the assessee failed to offer the said incomes for taxation with a dishonest intention to conceal its income.

Further, the assessee has failed to offer any plausible explanation in this regard thus the assessee has failed to make full and true disclosure of the facts while computing its income and filed a return of income with inaccurate particulars and thereby concealing its taxable income.

 The Tribunal held that the assessee has failed to make out a case for avoiding levy of penalty in its case as the primary onus in the case in terms of Explanations to section 271(1) (c) of the Income Tax Act has not been discharged by the assessee and upheld the imposition of penalty.

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