One of the favourite section of the Income tax from the revenue side is section 271 (1)(c), one should understand when the section is initiated against the assessee.
Section 271 (1)(c) of Income tax act, 1961 says that any person is liable for penalty if-
Conceals particulars of his income or, furnished inaccurate particulars of his income.
The penalty for not proving correct details of your income or concealing income tax will be 100% to 300% of the tax evaded as per section 271(C) of Income Tax Act.
One must understand the difference between concealment and inaccurate particulars.
Concealment means hiding or not showing the income. And whereas inaccurate particulars means showing income which is either understated or shown or stated in a manner which in unacceptable or wrong in the view of income tax authorities.
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But, despite the fact that it is a powerful section one should note that the revenue fails to fix the charge under the referred section. There may be conflict of views between the department thinking and the thought and treatment as done by the assessee. On the fact that it is mere conflict of view it cannot tantamount to the penalty being levied under the section.
One may note that, against this section, case law of CIT v. Reliance Petroproducts (P) Ltd. is having very significant effect. The referred case had gone up to the highest level of judiciary i.e. the Supreme Court. The court made it very clear that when there is conflict of views (on the particular matter which is supported by documents and other supportable) the department cannot levy the penalty on mere difference of opinions.
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Sometimes the department proves that the action u/s 271(1)C should be levied but one should take into consideration that there are sometimes bonafide mistakes that the assessee do (the mistakes that are due to the fact that the assessee do not knew facts about the particular thing, or not knowing all the facts, it is important to know the reason that this can become as a excuse under the law as to where there is involvement of third party), mistake should not be the excuse under, law which is impermissible. Mistake should be genuine.
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Concealment of income is having far serious implications as when penalty is being levied for this. There are chances that assessee fails to prove himself not guilty. There are many instances where there was search and survey being carried by department and penalty was being levied u/s 271 (1)(c), reason being that it was the department that found that income and due to that additional income came into the light. Therefore being concealment of income and as a result the penalty being levied.
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Inaccurate particulars (from the view point of assessee) can be dealt with slight ease. As when views of assessee and department varies there are chances that assessee proves himself right.
On the part of A.O. he should be convinced that penalty u/s 271(1)(c) should be attracted either on the part of concealment of income or either due to furnishing of inaccurate particulars. The findings of Assessing Officer (A.O.) should be concrete and supported by evidence thereof.
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Notice under section is very important. The A.O. should clearly point out that where there is concealment of income or there is case of inaccurate particulars of income. There are many case laws being ruled out in favour of assessee where incorrect notice leads to fact that the proceeding under the act being void-ab-initio.
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The author of above article is Shrey salecha, ICAI.
