Commissioner of Income Tax vs Praveen B. Gada (HUF)

Heard on the question of admission.

This appeal under s. 260A of the IT Act 1961 (for short "the Act") is directed against the order dt. 6th April, 2010 passed by income tax Appellate Tribunal, Bench Indore (for brevity "the Tribunal") in ITA No. 74/Ind/2010 for the asst. yr. 2004-05.

Briefly stated, the assessee (HUF) claimed loss of Rs. 15,40,818. He claimed the said loss as business loss whereas, the Revenue treated it as a capital loss. The CIT(A) confirmed the order of AO making addition of Rs. 15,40,818, as a capital loss. In the appeal, the Tribunal upholding the orders of the CIT(A) held that the assessee had concealed certain facts.

On the basis of the aforesaid observation made by the Tribunal the proceedings under s. 271(1)(c) of the Act were initiated against the assessee. The Dy. CIT, Indore vide order dt. 14th May, 2009 recorded a finding that the assessee has made a wrong claim of expenditure, whereas he could not substantiate his claim in that regard. Accordingly, the Dy. CIT, Indore vide order dt. 14th May, 2009 held the assessee guilty of concealment and ordered for penalizing him under s. 271(1)(c) of the Act. In appeal, the CIT(A) affirmed the findings of the Dy. CIT, Indore.

Aggrieved, the assessee filed an appeal before the Tribunal. The Tribunal, considering the rival submissions and taking note of provisions contained in s. 271 of the Act found that for imposing penalty under s. 271(1) of the Act there should be concealment of particulars of income or furnishing of inaccurate particulars of such income. The Tribunal found that the assessee claimed it as a business loss whereas, Revenue treated it as a capital loss and on that basis provisions of penalty under s. 271(1)(c) of the Act cannot be invoked. It held that for imposing penalty there should be concealment of income or furnishing of inaccurate particulars. The Tribunal held that both the conditions are missing and merely because in the quantum proceedings a finding has been recorded against the assessee that itself would not be sufficient to hold that the assessee has concealed the particulars of income. The Tribunal also noticed that there was no deliberate mistake in the original return, nor there is concealment of particulars of income. In the circumstances, the Tribunal set aside the finding recorded by the Dy. CIT as also CIT.

Having heard learned counsel for the appellant, we find that in the absence of any independent finding by the AO that the assessee either concealed his income or furnished inaccurate particulars, merely because the assessee treated it as a business loss, whereas the Revenue treated it as a capital loss, the provisions contained under s. 271(1)(c) of the Act would not attract. In the circumstances, we find no infirmity in the order passed by the Tribunal.

In our considered view, the finding recorded by the Tribunal that the assessee did not conceal his income nor furnish the inaccurate particulars, are wholly justified and needs no interference. Merely on the basis of finding recorded by the Tribunal in the original proceedings (quantum proceedings) in which it has been observed that the assessee has concealed certain facts, would not itself attract provisions of s. 271(1)(c) of the Act. In the absence of any mens rea a finding about concealment of particulars of income or furnishing inaccurate particulars, in our considered view, could not have been arrived at. Accordingly, no case for interference in the order passed by the Tribunal is made out. As a result, the appeal fails and is hereby dismissed.