Settlement Commission is Empowered to Levy Penalty for Concealment of Income | HC

Case Details: Rajendra Prasad Agarwal v. Income-tax Settlement Commission - [2024] 161 taxmann.com 638 (Allahabad)

Judiciary and Counsel Details

• • Saumitra Dayal Singh & Donadi Ramesh, JJ.
  • S.K. Garg & Ashish Bansal for the Petitioner.
  • Krishna Agarwal & Manu Ghildyal, C.S.C. for the Respondent.

Facts of the Case

The assessee purchased agricultural land in 1983. After the change in land use, he executed a Power of Attorney (PoA) in favour of the third person. Subsequently, the PoA holder executed the sale deed for that land. The assessee filed his return of income for the relevant assessment year without considering the capital gain arising from the transfer of such land.

During the assessment proceedings, the assessee disclosed the above capital gain, which was assessed to tax. Later, the assessee applied to the Settlement Commission to settle the case. The Settlement Commission imposed a penalty under section 271(1)(c) for furnishing inaccurate particulars of income. The matter reached the Allahabad High Court.

High Court Held

The High Court held that the assessee had furnished the explanation with respect to the alleged concealment. According to the assessee, he was not aware of the sale deed executed by his Power of Attorney holder. Further, the assessee contended that the property was sold against cash payment received by the said holder.

The penalty for concealment may be imposed even by the Settlement Commission. There is no legal embargo against such levy of penalty. At the same time, it is sine qua non to impose such penalty that there must be ‘concealment’ of particular income or the assessee must have furnished ‘inaccurate’ particulars of income before the Settlement Commission.

The Settlement Commission had not expressed any doubt about disbelieving the explanation furnished by the assessee. Since the penalty under section 271(1)(c) may be imposed only upon the occurrence of concealment and not upon under-disclosure, the burden on the Revenue Authority to establish such concealment remained undischarged.

Though the revenue authorities made the allegation of concealment, the assessee furnished his fact explanation to the same. Without disbelieving the explanation furnished on cogent reasons and without reaching a conclusion of concealment on material evidence on record, the assessee did not stand exposed to the levy of penalty as a logical fallout of addition sustained in the assessment of income.

Therefore, no conclusion of concealment may have arisen solely occasioned by that estimation of income by way of capital gains made by the Settlement Commission. In the absence of any independent evidence to establish the receipt of extra consideration and in the absence of any finding to reject the fact explanation furnished by the assessee, both as to ignorance of the sale deed executed by his Power of Attorney and also with respect to the actual consideration received, the element of concealment was not established.

List of Cases Referred to

• • CIT v. Madan Teatres Ltd. [2014] 42 taxmann.com 26/[2013] 260 CTR 75/[2014] 221 Taxman 219 (Calcutta) (para 23).