2013 (7) TMI 92 - HC - Income Tax

Penalty u/s 271(1)(c) - additional income shown in the Revised returns - Tribunal ordered that there was concealment of income under original returns warranting levy of penalty under Section 271(1)(c) - Held that - Revised return was filed by the assessee offering an income under the head of capital gains - However, original return filed made no reference to the sale of shares at all and it merely indicated the salary income received by the assessee - Leaving aside the valuation on shares, there is hardly any indication as regards the transaction in shares, which, even accepting the assessee s case, had not been a loss - when confronted with the question on the source of funds on the investment made in mutual fund by the assessee s wife, the assessee took his opportunity first to file the revised returns to set his assessment in order - On the incorrectness of the returns originally filed, not disclosing the transaction in shares, the proceedings subsequent to the statement filed certainly indicates the conduct of the assessee. The fact that the assessee had filed revised returns and the same was accepted, by itself, however, does not efface the fact of non-disclosure of the income arising under the head of capital gains in the original return. In the background of this conduct, we do not find any acceptable ground to set aside the order of the Tribunal as held by the Apex Court in a series of decisions. - Following the decision of Union of India Vs. Rajasthan Spinning & Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA - Decided in favour of Revenue.

Summary

Issues:
1. Justification of Tribunal's decision on concealment warranting levy of penalty under Section 271(1)(c).
2. Justification of Tribunal's conclusion on the voluntary nature of the revised return and its timing in relation to the notice under Section 148.
3. Tribunal's decision on penalty leviable due to methodology of computing capital gains on the sale of shares and non-disclosure in the original return.

Issue 1:
The Tax Case Appeal pertained to the assessment year 2002-03, challenging the penalty imposed by the Tribunal. The key substantial questions of law revolved around whether the Tribunal was correct in holding that concealment justified the penalty under Section 271(1)(c). The assessee argued that the revised return was voluntary, correcting an error in the original return regarding capital gains from share transactions. The Assessing Officer contended that the revised return was a result of evidence against the assessee, indicating lack of voluntariness. The Commissioner of Income Tax (Appeals) ruled in favor of the assessee, but the Tribunal upheld the penalty, emphasizing the contumacious conduct of the assessee in not originally disclosing the income. The Tribunal highlighted the revised return's timing in response to detection, indicating non-disclosure in the original return, justifying the penalty.

Issue 2:
The second issue involved the Tribunal's justification for concluding that the revised return filed by the assessee was not voluntary, despite the notice under Section 148 being issued after the revised return. The Tribunal considered the sequence of events, including an investigation into the wife's mutual fund transactions, leading to the revised return. The assessee argued that the revised return was immediate upon realizing an incorrect calculation method for capital gains. However, the Tribunal found the timing suspicious, suggesting an attempt to pre-empt further investigation. The Tribunal deemed the revised return as a response to detection, indicating non-disclosure initially, justifying the penalty under Section 271(1)(c).

Issue 3:
The final issue focused on the Tribunal's decision regarding the penalty leviable due to the methodology of computing capital gains on share sales and non-disclosure in the original return. The assessee contended that the revised return corrected an error in calculating profits, with no mala fide intent in the original return. The Tribunal, however, emphasized the conduct of the assessee in not disclosing the gains initially, leading to the revised return after detection. The Tribunal highlighted the contumacious conduct and non-disclosure in the original return as justifying the penalty under Section 271(1)(c). The Tribunal rejected the assessee's arguments, confirming the penalty based on the conduct and circumstances surrounding the revised return filing.

In conclusion, the High Court upheld the Tribunal's decision, confirming the penalty under Section 271(1)(c) based on the non-disclosure of income in the original return, the timing and nature of the revised return, and the conduct of the assessee during the assessment proceedings.