TMI Blog2014 (9) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax Department - It has already been mentioned that the applicant was not maintaining books of accounts and there was no occasion to disclose or conceal the gold from the point of view of Income Tax – though, the applicant did not have the benefit of having the gold, its value was computed as income, instead of taking the seizure thereof as loss - Once it is treated as loss, non-disclosure thereof cannot be the subject matter of Section 271 (1)(c) of the Act - The provision concerned does not deal with the concealment of losses – thus, the levy of penalty runs contrary to the provisions of the Act – Decided in favour of assessee. - Referred Case No. 109 of 2001 - - - Dated:- 8-8-2014 - L. Narasimha Reddy And M. Satyanarayana Murthy,JJ. For the Applicant : Sri Y. Ratnakar For the Respondent : Sri S. R. Ashok, Senior Counsel SC for Income Tax Dept. ORDER (Per Honble Sri Justice L. Narasimha Reddy) Hyderabad Bench B of Income Tax Appellate Tribunal passed order dated 21.7.1998 in R.A.No.268/Hyd/97 (in ITA.No.466/Hyd/94), referring the following question for opinion of this Court, at the instance of the assessee. Whether on facts and circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to tax; and on the other hand, equivalent amount was disallowed as business loss; resulting from confiscation. He contends that whatever be the circumstances under which such inconsistent views were taken, there was no basis for imposition of penalty, particularly when no finding was recorded to the effect that the Income Tax Officer was satisfied about the concealment of gold. He submits that the applicant was an ordinary assessee, not being under obligation to maintain any books of accounts and the question of concealment of the gold in the income tax returns or the books of account does not arise. He has placed reliance upon certain precedents. 5. Sri S.R. Ashok, learned Senior Standing Counsel for the Income Tax Department, on the other hand, submits that it is a matter of record that the gold is not only seized from the applicant, but also was confiscated, and once the order of confiscation became final, the necessary corollary thereof is that the gold must be treated as the asset acquired through unexplained income. He submits that in the context of levying penalty, the intention of the assessee hardly matters and mere giving of inaccurate information or particulars is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e intangible addition to the assessees book profits, cannot by itself, lead to the conclusion that there was any concealment. 9. Recently, this Court in CHENNAKESAVA PHARMACEUTICALS v. CIT (AP) (2012) 349 ITR 196 (AP) held that before an Assessing Officer initiates proceeding under Section 271 (1)(c) of the Act, he must record his satisfaction that the assessee concealed the income or furnished inaccurate particulars of income, in his return. 10. In COMMISSIONER OF INCOME TAX, PATIALA v. PIARA SINGH (1980) 124 ITR 40, the Supreme Court took the view that if the business activity of an assessee is found to be illegal, neither the profits earned nor the losses incurred thereon can constitute the subject matter of Income Tax Act and, conversely, if the profits of an illegal business can be brought or dealt with under the Act, equally the lossess also must be deducted as legitimate expenses in the business. The following paragraph was extracted from the judgment of the Supreme Court in CIT v. S.C. KOTHARI, reported in (1971) 82 ITR 794: the business is illegal, neither the profits earned nor the losses incurred would be enforceable in law. But, that does not take the profits ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was doing the business of manufacture and sale of heroin. Once the income tax authorities record such a finding of fact, it follows that any loss from such a business is a business loss. A specific reference was made to Section 37 of the Act, as amended. 13. In CIT v. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC), the Supreme Court held that a mere incorrect claim cannot be treated as a concealment or furnishing inaccurate particulars under Section 271 (1)(c) of the Act. 14. Learned Senior Counsel for the respondent, relied upon a judgment of the Supreme Court in UNION OF INDIA v. DHARMENDRA TEXTILES PROCESSORS (2008) 306 ITR 277 (SC), wherein it was held that the assessee would be exposed to strict liability, once it is found that there was a concealment or furnishing of inaccurate particulars, and that the penalty under Section 271 (1)(c) is a civil liability. It was also held that the concealment or furnishing of inaccurate particulars need not be wilful. 15. Keeping in view the principles enunciated in the precedents referred to above, the case of the applicant needs to be dealt with. 16. The applicant filed returns by disclosing the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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