2005 (5) TMI 45 - HC - Income Tax

Penalty explanation - assessee was not able to offer any satisfactory explanation for the sum of Rs. 11, 99, 242.54 in regard to its source - there is a deemed addition in the event the concerned authorities record their satisfaction that there is no proper and plausible explanation offered by the assessee or he has failed to substantiate such explanation - Assessee s claim that he had made the surrender to buy peace with the Income-tax Department would also not prevent levy of penalty for concealment of income as there can be no agreement or estoppel against the statute - order passed by the Assessing Officer is valid and within the time-limit prescribed under section 271(1)(c) for imposition of penalty

Summary

Issues:
- Imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961
- Surrender of income for taxation purposes
- Bona fide explanation for trading addition

Imposition of Penalty under Section 271(1)(c):
The case involved an appeal under section 260A of the Income-tax Act, 1961, where the Assessing Officer had imposed a penalty under section 271(1)(c) on the assessee. The Commissioner of Income-tax (Appeals) partly allowed the appeal, holding that the penalty was premature as it was imposed before any penalty order. However, the Tribunal allowed the Department's appeal, stating that the penalty was justifiable under the Explanation to section 271(1)(c). The Tribunal emphasized that the onus was on the assessee to rebut the claim of concealing income, and surrendering income to avoid litigation did not prevent penalty imposition. The Tribunal set aside the Commissioner's order and upheld the penalty imposed by the Assessing Officer.

Surrender of Income for Taxation Purposes:
The assessee had surrendered a certain amount for taxation purposes to avoid further litigation, relying on the judgment in Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705. The Commissioner of Income-tax had initially held that no penalty was imposable under section 271(1)(c) as the surrender was voluntary and not a result of concealment detected by the Department. However, the Tribunal disagreed, considering it a case of deemed concealment and found the explanation provided by the assessee not bona fide. The Tribunal referred to previous judgments to support its decision, ultimately overturning the Commissioner's findings.

Bona Fide Explanation for Trading Addition:
Regarding the imposition of penalty on the trading addition made by the Assessing Officer, the Commissioner of Income-tax (Appeals) had held that penalty was not imposable if the explanation provided by the assessee was bona fide. The Commissioner cited various court decisions to support this stance. However, the Tribunal disagreed, stating that the explanation was not bona fide and the penalty was justified. The Tribunal referred to the Assessing Officer's findings that the assessee failed to provide a satisfactory explanation for the amount in question, leading to the penalty imposition upheld by the Tribunal.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision regarding penalty imposition under section 271(1)(c) and the deemed concealment of income. The court emphasized that the Tribunal's findings on facts were final, and no substantial question of law arose for consideration. The parties were directed to bear their own costs in the matter.