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Issues involved: The assessment of penalty under section 271(1)(c) of the Income-tax Act for concealment of income.
Summary: The High Court of Kerala was presented with questions regarding the justification of penalty under section 271(1)(c) of the Income-tax Act for concealment of income during the assessment year 1987-88. The assessee initially declared a total income of Rs. 2,10,460, which was later revised to Rs. 3,76,920 and then to Rs. 4,21,920. The Assessing Officer issued a penalty notice under section 271(1)(c) based on the discovery that purchases amounting to Rs. 1,61,459 were found to be bogus. The assessee claimed that the purchases were made through brokers and could not provide sufficient evidence to support the transactions. The Assessing Officer, after giving ample opportunity to the assessee to produce relevant registers and documents, concluded that the purchases were indeed bogus. The assessee failed to provide purchase and sale registers, stock registers, or details of the brokers involved in the transactions. The Assessing Officer imposed a penalty of Rs. 1,05,730 under section 271(1)(c) which was upheld in appeal before the appellate authority and the Appellate Tribunal. The High Court determined that the assessee's failure to provide essential details and documents, coupled with the discovery of understated stock during a previous search operation, supported the conclusion of concealment of income. The Court upheld the penalty imposed by the Assessing Officer, affirming that the purchases amounting to Rs. 1,61,459 were indeed bogus. Consequently, both questions were answered in favor of the Revenue and against the assessee.
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