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Palkhi Investments & Trading Co. P. Ltd., Mumbai Versus The Income Tax Officer, Mumbai

2016 (6) TMI 847 - BOMBAY HIGH COURT

Penalty u/s 271(1)(c) - concealment of income with respect to the addition made u/s 41(1) of the Act on account cessation of liabilities - Held that:- In penalty proceedings all three authorities have concurrently arrived at a finding of fact that the claim made by the assessee with regard to its outstanding liabilities for subject assessment year was false. These findings of fact are not shown to be perverse in any manner. The legal claim made before us that once a liablility is shown in the ba .....

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s that in terms of Section 139 of the Act a return of income under the Act has to be filed along with the balance sheet and profit and loss account. In its absence the return of income is defective. Thus, same are to be considered as a part of the return of income. Further by showing a non existing liability as an existing liability, in the subject assessment year, the attempt was to escape offering of the ceased liability as income obliged to do under Section 41(1) of the Act. Thus, not offerin .....

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ome Tax Appellate Tribunal (the 'Tribunal'). The appeal is in respect of penalty imposed under Section 271(1)(c) of the Act relating to the Assessment Year 2005-06. 2. The appellant has raised the following questions of law for our consideration: (i) Whether, on the facts and the circumstances of the case, and in law, the Tribunal erred in confirming the penalty of ₹ 38,71,366/levied under Section 271(1)(c) of the Income Tax Act, 1961 for alleged concealment of income with respect .....

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₹ 1.26 crores to the total income declared by the appellantassessee. This addition was in respect of trade liabilities which had ceased to exists and represented income in terms of Section 41(1) of the Act. Being aggrieved the assessee carried the issue in appeal to the Commissioner of Income Tax (Appeal), who confirmed the same. On further appeal, the Tribunal reduced the addition under Section 41(1) of the Act from ₹ 1.26 crores to ₹ 1.05 crores. The assessee carried the iss .....

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d. Thereafter review petition was filed before this Court seeking to review the High Court order dated 16th November, 2010. However, it was also dismissed on 4th August, 2015. 4. In the meanwhile, the Assessing Officer issued a notice seeking to impose penalty under Section 271(1)(c) of the Act in respect of the subject assessment year. This was for furnishing inaccurate particulars of income and concealing income in its return of income for subject assessment year. The Assessing Officer by orde .....

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osed under section 271 (1)(c) of the Act upon the appellant. 5. On further appeal, the Commissioner of Income Tax (Appeals) by order dated 3rd February, 2011 upheld the order of the Assessing Officer imposing penalty. It held that in quantum proceeedings it was held that trading liability ceased to exist during the subject assessment year. Thus the same led to ₹ 1.05 crores being taxed, under section 41(1) of the Act. By not disclosing the same, the assessee had furnished inaccurate/incorr .....

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During the course of hearing in penalty proceedings the Tribunal raised two queries, namely, evidence to prove as to when liability claimed to be subsisting arose for first time and other whether the respondent had received any letter from HDFC Ltd. stating that the amount due to M/s. Karamchand Chunnilal should be paid over to them as it had taken over its business as contended by the assessee. The impugned order records that the assessee was not in position to respond on both the issues. The .....

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earned counsel appearing for the revenue attempted to once again take us over applicability of Section 41(1) of the Act to the facts of present case. We stopped him from doing the same. The applicability of Section 41(1) of the Act to the present facts stands concluded by the decision of this Court dated 16th December, 2010 from which a Special Leave Petition filed by the assessee before the Apex Court was also dismissed. Thereafter Mr.Joshi contended as under : (a) the penalty proceedings are d .....

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ncome, the disclosure of existing liabilities was only in the balance sheet. Therefore no penalty is imposable. 8. We have considered submissions made on behalf of appellants. There can be no dispute with regard to proposition that the penalty proceedings are different from assessment proceedings and mere addition in quantum proceedings would not ipso facto result in imposition of penalty. We find that in quantum proceedings which were taken up to the Supreme Court the Tribunal had recorded a fa .....

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