Willful Concealment – Penalty Proceedings are Void in case of Notice without Application of Mind
The assesse Safina Hotels Private Ltd. claimed certain deductions as revenue expenditure disclosing the same under the head ‘financial expenses’ in the income tax return filed by him. The Assessing Officer was unsatisfied with the claimed deductions so he ordered further scrutiny of the return. After verification on being satisfied that the claim made by the assesse as revenue expenses is in the nature of capital expenses and so allowed the deduction.
Thus, separate proceedings were initiated under Section 271(1)(c) of the Act to levy penalty for willful concealment as well as for furnishing inaccurate particulars of such income. In the printed proforma the Assessing Officer deleted the matter relating to willful concealment of particulars as well as furnishing inaccurate particulars of such income.
The High Court declared that the notice was issued in order to levy penalty under Section 271(1)(b) of the Act whereas the order passed by the Assessing Officer under Section 271(1)(c) of the Act clearly indicates that there was no application of mind by the Assessing Officer while issuing the notice under Section 274 of the Act. It is indispensable from the order under Section 271(1)(c) of the Act that the Assessing Officer noticed that the assessee had intention of willful concealment and so has declared the revenue expenditure in the financial expenses which was capital in nature.
If this be the case, the Assessing Officer’s judgment to come to a conclusion that there was no willful concealment of the particulars of the income by the assessee or that the assessee has filed inaccurate particulars of income in order to get deductions or escape from income tax payment is correct. This shows that the Assessing Officer had no jurisdiction to pass the penalty order under Section 271(1)(c) of the Act.
The facts are similar to the case of CIT vs. Manjunatha Cotton and Ginning Factory. In the above mentioned case it was reached to a conclusion that the Assessing Officer has not applied his mind at the time of issuing notice under Section 274 R/W Section 271(1)(b) of the Act. Considering the relevant case the Appellate Commissioner had taken into matter the appeal of the assessee and authorized the appeal irrespective of the order passed by Assessing Officer which had been reversed by ITAT on the ground that the assesse had made willful concealment of particulars in order to evade tax.