2015 (2) TMI 763 - HC - Income Tax

Penalty u/s 271(1) (c) - tribunal upheld penalty for assessment years 1985-86 to 1987-88 - Held that - No substantial question of law arises for consideration of this Court. The learned Tribunal has set aside the penalties for the assessment years 1982-83, 1983-84 and 1984-85, for the reason that assessed income was based upon estimated household expenses. Since such basis have been taken into consideration for three assessment years, we find that such reason cannot be the basis of setting aside the penalty in the three subsequent years i.e. 1985-86, 1986-87 and 1987-88, as the Tribunal itself has treated the years in question differently. The Tribunal has considered the revised income on the basis of unexplained deficiencies in the shape of Fixed Deposits(FDs), deficiency in stock, expenses incurred in cash and cash received on sale of property etc., therefore, the basis of penalty is not the estimated household expenses but the other reasons as there was difference of ₹ 70,000/- ₹ 26,000/- and ₹ 60,000/- in the assessment years 1985-86, 1986-87 and 1987-88 respectively on account of difference of the revised income and the income assessed. - Decided against assessee.

Summary

Issues:
Assessment of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 1985-86, 1986-87, and 1987-88 based on the revised income declared by the assessee.

Analysis:
The assessee filed original returns of income for the mentioned assessment years, declaring certain amounts which were later revised. A survey operation was conducted, and revised returns were filed. The Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961, based on the difference between the revised income and income assessed. The penalty was imposed for all three assessment years.

The appeal against the penalty was dismissed by the Assessing Officer but set aside by the Income Tax Appellate Tribunal for some prior years. The Tribunal upheld the penalty for the years in question, stating that the income assessed was not solely based on estimated household expenses but also on unexplained income from various sources like Fixed Deposits, deficiency in stock, cash expenses, and cash received from property sale.

The assessee argued that since the Tribunal had previously rejected estimated household expenses as a valid ground for penalty in other years, the penalty for the current years should also be set aside. However, the revenue contended that the penalty was imposed based on facts such as unexplained income from various sources, not just estimated household expenses.

The High Court found that no substantial question of law arose for consideration. The Tribunal had differentiated the assessment of penalty for the current years from the prior years based on different reasons. The penalty was upheld for the assessment years 1985-86, 1986-87, and 1987-88 as it was not solely based on estimated household expenses but on other factors like unexplained income sources. Therefore, the Court ruled in favor of the revenue, affirming the imposition of the penalty based on the Tribunal's factual findings.

In conclusion, the High Court dismissed the reference by the assessee under Section 256(2) of the Income Tax Act, 1961, as no substantial question of law was found, and the penalty was upheld based on the Tribunal's factual findings regarding the sources of unexplained income, not solely on estimated household expenses.