Penalty under section 271(1)(C)

1. I am a surgeon by profession and I am under the employment of a multi specialty Hospital at Hyderabad. I am regularly in receipt of my professional payments from the institution. Recently, it is understood that the Income-tax department had found that the Hospital had been collecting certain sums in cash in my name of my department, which was substantially used for creation of infrastructural facility and partly intended for payment to the doctors. It is ascertained that the Hospital has disclosed before the department the extent of such collections made from the public in respect of my department and the sum ear marked for me. Upon receiving such information and the money appropriated to my account, I volunteered to file revised returns and also pay tax, including interest thereon up to the date of filing of the return.


2. It is true that the returns were filed immediately after the department issued me notice re-opening my assessments.

While the returns filed were accepted, the assessing Officer has levied penalty under section 271(1)© for all the years. I have filed appeals against the penalty orders before the Appellate Authorities. Frankly speaking that but for the mis information from the hospital authorities, I would have filed the return including the additional sum even during the normal process.Since I find a number of interesting issues being discussed in your forum, I feel it appropriate to make a reference to you and enlist your valuable view on this.

Dr.Ramesh Reddy, Hyderabad.

The issues high lighted by the reader clearly goes to establish that he has been maintaining a very high profile in honest compliance with his tax obligations. Such a state is normally more pronounced if one is to maintain the same degree of respect and dignity in the moral fabric of one’s public life. Coming to the issue on hand, the point high lighted by the doctor is almost identical to the decision of the Supreme Court in the case of T.Ashok Pai Vs. Commissioner of Income-tax reported in 292 ITR page 11.

In this decision, the Hon’ble Court has ruled that the word “Inaccurate”, in the context of levying penalty under section 271(1)© signifies a deliberate omission on the part of the assessee. Such deliberate act must be for the purpose of concealment of income or furnishing inaccurate oarticularas. The assessing Officer is required to arrive at a finding that the explanation offered by the assessee, in the event he offers one, was false. He must be found to have failed to prove that such explanation was no only not bona fide but all the facts relating to the same which are material to he income were not disclosed by him. Thus apart from the explanation being not bona fide, it should be found as a fact hat he has not disclosed all the facts that were material for the computation of income. Holding this view, the Hon’ble Court held that in the said case, since the assessee was dependent upon hios attorney for accounting all his income and had rendered his return only on the basis of such advice, which later turned out to be in correct, he cannot be identified as one having either furnished inaccurate particulars or concealed his income.

Applying the ratio of the said decision, in the case in question, as per facts furnished by the doctor reader, he did not have information about cash collection by the Hospital which was reportedly done for provision of infrastructural facility in the hospital and partly for the benefit of the doctor. This information basically having been with held by the hospital which was not within his knowledge, his filing a revised return and paying taxes including interest threon, cannot be dubbed as concalment and more so, visited with a penalty. The reader is advised to cite this decision which is almost akin to the facts obtaining in his case.