2005 (3) TMI 86 - HC - Income Tax

Levy of penalty of Rs. 18, 000 under section 271(1)(c) - addition of Rs. 30, 000 as concealed income - income from undisclosed source - once the explanation offered by the assessee is rejected then in that event a case for imposition of penalty under section 271(1)(c) is made out. - Tribunal seems justified in upholding the penalty under section 271(1)(c)

Summary

Issues:
1. Addition of Rs. 30,000 as concealed income.
2. Justification of penalty of Rs. 18,000 under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The High Court of Madhya Pradesh addressed a case involving the assessment year 1988-89 where the main dispute revolved around the addition of Rs. 30,000 in the total income of the assessee as income from an undisclosed source. The Assessing Officer, Commissioner of Income-tax (Appeals), and the Tribunal upheld this addition, leading to penalty proceedings under section 271(1)(c) of the Act. The assessee, a cotton ginning and pressing firm, provided an explanation for the addition, stating that the amount was credited into the books on a specific date and was supported by material facts and evidence. However, this explanation was not accepted by the authorities, resulting in the penalty imposition.

The Tribunal, in dismissing the appeal filed by the assessee, upheld the penalty by stating that the assessee failed to substantiate the explanation offered and deemed it as an afterthought. The High Court concurred with this decision, emphasizing that the explanation provided by the assessee was rejected by all three authorities, indicating a case of concealment. The Court highlighted that once the explanation is rejected, the imposition of penalty under section 271(1)(c) becomes necessary, especially when no technical issue is involved.

Furthermore, the Court rejected the assessee's reliance on a previous case, stating that it was not applicable to the current scenario. The judgment concluded by affirming the Tribunal's decision to uphold the penalty under section 271(1)(c) of the Act, ruling against the assessee and in favor of the Commissioner of Income-tax (Revenue). The Court emphasized that based on the facts and findings, the imposition of the penalty was justified, considering the rejection of the assessee's explanation by the authorities.