2015 (4) TMI 1184 - HC - Income Tax

In this situation, admit on the following substantial questions of law 1. Whether, on the facts and in the circumstances of the case, the Hon ble ITAT erred in law by upholding the order of the CIT(A) deleting the penalty of ₹ 48,00,000/levied under Section 271(1)(c) of the Income Tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Hon ble Tribunal erred in law by considering extraneous factors as basis for surrender of income of ₹ 1,40,00,000/disregarding the fact that unaccounted closing stock of ₹ 1,40,00,000/was found during survey?

Summary

Issues:
Penalty for non-disclosure of additional income under Section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The High Court of Bombay heard arguments from both the appellant's and respondent's counsels regarding the penalty for disclosing additional income of Rs. 1,40,00,000. The Income Tax Appellate Tribunal (ITAT) had set aside the penalty imposed. The ITAT's order for the Assessment Year 2007-08 was examined, which revealed that the assessee initially disputed the addition but later expressed an intention to settle. The return filed did not disclose the amount initially, but a revised return later mentioned a lower value. Subsequently, a return filed in 2008 disclosed the full amount mentioned in the initial statement. The court agreed to consider substantial questions of law raised regarding the ITAT's decision to delete the penalty under Section 271(1)(c) of the Income Tax Act, 1961. The court also questioned whether the ITAT erred in considering external factors for the income surrender, despite unaccounted closing stock being found during a survey. The respondent's counsel waived notice, and the assessee filed an application for additional facts, which would be reviewed during the final hearing.

This judgment primarily deals with the interpretation and application of Section 271(1)(c) of the Income Tax Act, 1961 concerning the penalty for non-disclosure of additional income. The court analyzed the sequence of events leading to the disclosure of the disputed amount by the assessee, highlighting discrepancies in the filing of returns and the varying amounts disclosed. The court agreed to examine substantial questions of law related to the ITAT's decision, focusing on whether the deletion of the penalty was justified and if external factors influenced the income surrender. The judgment underscores the importance of adhering to tax laws and the consequences of non-disclosure or inconsistent reporting of income, emphasizing the need for a thorough review of facts and legal provisions in tax-related cases.