G. Soma Reddy vs ITO

This appeal by an assessee under the Income Tax Act, 1961 (for short, the Act) relates to the assessment year 2000-01, 2001-02 and 2002-03. Assessee is an individual and the appeal is about the justification of levy of penalty u/s 271(1)(c) of the Act, which is in a sum of Rs. 33,187 for the assessment year 2000-01, Rs. 96,732 for the assessment year 2001-02 and Rs. 5,987 for the assessment year 2002-03. This appeal had been admitted for examination on the following questions of law.

Whether in law and on the facts and circumstances of the case, the Tribunal is justified in confirming the penalty u/s 271(1)(c)?

Whether in law and on the facts and circumstances of the case, the Tribunal is justified in confirming the levy of penalty u/s 271(1)(c) in the absence of any recording of satisfaction by the assessing officer in the assessment order before levying penalty u/s 271(1)(c) of the Act?

Whether in law and on the facts and circumstances of the case, the Tribunal is justified in confirming the penalty for the assessment years 2000-01 to 2002-03 for which years there is no revenue loss and the assessments have resulted in refund?

Heard Sri. Parthasarathi, learned counsel for the appellant and Sri G. Kamaladhar, learned standing counsel appearing for the respondent.

Background of the above appeal is that in the course of finalization of assessment in respect these assessment years, the assessing officer found that there was considerable discrepancy in the return of income as filed by the assessee and income as disclosed as business income from the activity of Civil Contract, whereas the payments received by the assessee as indicated by the client for whose benefit the assessee has executed Civil works and who had deducted tax at source indicated a much larger quantum of receipts.

The difference in terms of the returns as filed by the assessee and the amount as had been indicated by the client while deducting tax at source and remitting it to the account of the revenue is as under :

During the assessment proceedings and during the hearing, the Assessing Officer realized that for the purpose of filing of the return of income the assessee had tampered with the TDS certificate which had been issued by the person deducting tax at source and given to the assessee. While producing the certificate with the return the figures relating to the actual payment had been tampered and reduced as indicated above.

It is because of the reduced receipts as indicated by the assessee, the tax liability came down and the assessee had sought for refund from out of the tax deducted at source remitted to the revenue.

In such circumstances, the assessing officer was of the opinion that the provisions of section 271(1)(c) of the Act are attracted and therefore, proceeded to levy penalty, which was at Rs. 33,187 for the assessment year 2000-01, Rs. 96,732 for the assessment year 2001-02, Rs. 5,987 for the assessment year 2002-03.

Assessees efforts to get over this levy of penalty by the assessing officer before the CIT(A) and later the Income Tax Appellate Tribunal did not result in any success and therefore, this appeal before this Court u/s 260A of the Act.

Submission of Sri. S Parthasarathi, learned counsel for the assessee is that the assessee had voluntarily accepted the discrepancy and has also agreed to bring to tax the actual amount as had been indicated by the client who had deducted tax at source and remitted to the department and when the assessee himself has co-operated with the revenue, the question of levying of penalty u/s 271(1)(c) of the Act does not arise and at any rate there is no justification in levying penalty, that in such circumstances, when the assessee had admitted the discrepancy and moreover gave a clear and cogent explanation that being an ignorant illiterate person he was not aware of what had happened and who handed over the papers to the advocate and what discrepancy has taken place at their end.

On the other hand, submission of Sri. G. Kamaladhar, learned counsel appearing for the revenue is that this was a clear case of concealment of fact, not merely concealment but tampering of the certificate of TDS by altering the figures in the certificate as had been indicated by the person deducting tax at source but before placing it before the assessing authority the assessee had altered the figures so as to reduce the tax liability for three years and therefore, this was a case of not merely concealment but also concealment by tampering of records and no occasion arises for this Court to interfere in the appeal.

We have bestowed our consideration to the submission made at the Bar.

We find that the record does indicate the tampering of record on the part of the assessee, though the explanation given is that the assessee is an ignorant, illiterate person. That explanation itself cannot in any way absolve the assessee and even if the assessee is dependent upon his representative, it cannot be said that if it is to the assessees benefit he takes advantage of it but disowns his representative, when the violating act is detected.

Be that as it may, it is for the assessee to take such action with regard to his representative concerned, but that cannot constitute a ground or proper explanation for not to levy penalty etc.

We also notice that the questions of law as framed by this Court infact have to be answered against the assessee, as it indicates that the refund was only as a result of the manipulation by the assessee and the assessee has not paid any tax. It is precisely because of the refund, the problem arose for the assessee and concealment was detected by scrutiny etc. Viewed from any angle, we do not find any merit in this appeal for interference and as we are also of the view that assuming that there are other appeals questioning justification of levy of penalty u/s 271(1)(c) of the Act are awaiting pronouncement, that has nothing to do with the present appeal and therefore, the appeal is dismissed answering the questions against the appellant assessee.