2015 (10) TMI 541 - HC - Income Tax

Penalty under Section 271(1)(c) - whether income of ₹ 40 lakhs in the return of income filed for Assessment year 2001-02 was due to inadvertence/mistake? - Held that - No particulars of how and why the mistake occurred are forthcoming. Moreover, the appellant assessee had alongwith his original return of income, not paid the full tax attributable to amount of ₹ 40 lakhs. However, alongwith the revised return of income, the assessee paid tax of ₹ 2 lakhs on 12 December 2008. The assessment was completed on 26 December 2008. Till that date the additional tax payable on the amount of ₹ 40 lakhs has not been tendered by the appellant-assessee. It is only thereafter before passing the order of penalty that the appellant paid further tax which was payable on the additional income of ₹ 40 lakhs. Moreover, the immunity available from penalty under clause 2 to Explanation 5 to Section 271(1)(c) of the Act was forsaken by the appellant not honouring the statement made by him under Section 132(4) of the Act. This was on account of not having disclosed the same in the return of income filed only consequent to notice under Section 153A of the Act. We find that all the Authorities have concurrently come to the finding of fact that non disclosure of additional income of ₹ 40 lakhs in the return of income as originally filed consequent to notice under Section 153A of the Act was not bonafide. Penalty confirmed - Decided against the assessee.

Summary

Issues:
Imposition of penalty under Section 271(1)(c) of the Income Tax Act for non-disclosure of additional income in the return of income filed for Assessment Year 2001-02 due to inadvertence/mistake.

Analysis:
The appellant argued that the penalty under Section 271(1)(c) should have been set aside as the non-disclosure of additional income of Rs. 40 lakhs was due to inadvertence/mistake and was rectified by filing a revised return before the Assessment Order was passed. However, during a search and seizure action, the appellant disclosed additional income not previously declared during regular assessment proceedings. The appellant then filed a return of income for the Assessment Year but failed to disclose the additional income of Rs. 40 lakhs, which was only done after the Assessing Officer confronted the appellant. The Assessing Officer initiated penalty proceedings for breach, leading to the appellant filing a revised return disclosing the amount. The Assessing Officer imposed a penalty of Rs. 14 lakhs, which was challenged in further appeals.

The CIT(A) upheld the penalty imposition, stating that the omission to include the additional income was not bonafide as it was only offered after being confronted during assessment proceedings. The Tribunal also upheld this finding, noting that the disclosure in the revised return was after the non-disclosure was discovered during assessment. The appellant's counsel argued against the penalty, claiming it was a mistake and there was no intent to deprive the revenue. However, the explanation provided for non-disclosure was deemed insufficient, as no particulars of the mistake were provided. Additionally, the appellant had not paid the full tax attributable to the undisclosed amount initially but paid it later with the revised return. The authorities found the non-disclosure not bonafide, and the appellant forfeited immunity from penalty under the Act.

The High Court found that a reasonable and possible view was taken by the authorities, and no substantial question of law arose. Therefore, the appeal was dismissed, and no costs were awarded.