2015 (7) TMI 513 - HC - Income Tax

Penalty u/s 271(1) (c) - Bogus loan - CIT(A) deleted penalty levy as quashed by ITAT - Held that - In the original return the assessee had shown the return income of Rs. 7, 14, 500/-only. After the Investigation Wing detected the money laundering racket at Mumbai wherein the assessee was also found to have been involved only thereafter the assessee filed revised return of income declaring bogus loan of Rs. 10 lakh and interest thereon as additional income Thus it was established that the assessee has considered income of Rs. 10, 88, 972/-. It is also required to be noted at this stage that even after the original assessment was completed and during the course of investigation by communication dated 23.11.2004 the assessee wrote a letter to the Deputy Director of Investigation Mumbai offering additional income of Rs. 5 lakh shown as loan from Babulal D. Visrolia and Vinod L. Patodia. However even at that time also he offered the additional income of Rs. 5 lakh and thereafter when the reassessment proceedings were initiated the assessee admitted to have introduced bogus loan of Rs. 5 lakh from Babulal D. Visrolia and Rs. 5 lakh from Vinod L. Patodia in all Rs. 10 lacs and shown the additional income of Rs. 10 lakh and amount of Rs. 88, 972/-thereon in response to the notice under section 148 of the IT Act. Considering the facts and circumstances the concealment of income of Rs. 10, 88, 972/- came to be established and consequently when in a penalty proceedings under section 271(1)(c) of the IT Act the minimum penalty of Rs. 5 lakh has been levied by the AO which has been confirmed by the ITAT we see no reason to interfere with the impugned judgment - Decided against assessee.

Summary

Issues:
Challenge to impugned judgment by appellant-assessee regarding penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2001-02.

Analysis:
The appellant-assessee filed an appeal against the judgment of the Income Tax Appellate Tribunal (ITAT) which had allowed the Revenue's appeal, confirming the penalty of Rs. 5 lakh imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2001-02. The appellant, a tea trader, initially declared income of Rs. 7,14,050 but later, during investigations, admitted to taking bogus loans totaling Rs. 10 lakh. The Assessing Officer (AO) initiated penalty proceedings and imposed a penalty of Rs. 5 lakh. The Commissioner of Income Tax (Appeals) (CIT(A)) allowed the assessee's appeal and deleted the penalty, but the ITAT reversed this decision, upholding the penalty. The High Court noted that the appellant had concealed income of Rs. 10,88,972 by admitting to the bogus loans during reassessment proceedings. The Court found no error in the ITAT's decision to restore the penalty imposed by the AO. Consequently, the appeal was dismissed as no substantial question of law arose.

Therefore, the key issue in this case was the imposition of a penalty under section 271(1)(c) of the Income Tax Act, 1961 on the appellant-assessee for concealing income by admitting to bogus loans during reassessment proceedings. The court upheld the penalty imposed by the AO, which was confirmed by the ITAT, as the appellant's concealment of income was established during the investigation, and no error was found in the ITAT's decision to restore the penalty.