2015 (12) TMI 114 - HC - Income Tax

Levy of penalty under section 271(1)(c) - surrender of income - Held that - Tribunal held that the surrender had been made on account of discrepancies found in the books of account, loose papers, documents etc. maintained by the assessee. The assessee had incorporated the surrendered amount in the profit and loss account but by showing the sale of opening stock at lower price, the income was again reduced to ₹ 48,054/-. The assessee deposited the amount of ₹ 14 lacs in the bank stating that miscellaneous assets were purchased which were later on sold. There was no evidence to show the existence of such assets Since the assessee itself in its letter of surrender admitted that the the amount of ₹ 14 lacs was surrendered to cover up all alleged discrepancies in the books of account, loose papers, documents, stock, byproducts and other record, the Tribunal was right in upholding the levy of penalty on ₹ 14 lacs addition imposed by the Assessing Officer. Learned counsel for the assessee has not been able to point out any error in the approach of the Tribunal warranting interference by this Court. - Decided against assessee.

Summary

Issues:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on surrender of amount and discrepancies in books of account.

Detailed Analysis:
1. The judgment pertains to ITA Nos. 60 and 68 of 2015, where the issue involved was the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961. The facts were extracted from ITA No. 60 of 2015, where the appellant challenged the order passed by the Income Tax Appellate Tribunal regarding the levy of penalty for the assessment year 2007-08. The key question was whether the penalty was unreasonable considering the surrender of amount and the interpretation of relevant legal principles.

2. The assessee, engaged in trading of paddy and rice, surrendered an amount of Rs. 14 lacs during a survey conducted under Section 133A of the Act. The surrender was made to cover discrepancies found in the books of account. Despite explanations and appeals, the Assessing Officer added the surrendered amount to the income, leading to penalty proceedings under section 271(1)(c). Various appeals were filed, culminating in the Tribunal partially allowing the appeal and deleting the penalty on certain grounds while upholding it on the cash deposits of Rs. 14 lacs. The appellant challenged this decision before the High Court.

3. The Tribunal found that the surrender was made due to discrepancies in the books of account, and the amount was later deposited in the bank by the assessee. However, there was no evidence of the existence of the assets claimed by the assessee. The Tribunal upheld the penalty on the Rs. 14 lacs addition, considering the lack of full disclosure of facts. The High Court concurred with the Tribunal's findings, emphasizing that the surrender was to cover up discrepancies, and the appellant's explanations lacked credibility.

4. The appellant relied on certain legal precedents to argue against the levy of penalty. However, the Court distinguished those cases based on the specific facts of the present case. The Court highlighted that the appellant's admission of discrepancies during the surrender weakened their defense against the penalty. Additionally, the Court cited a Supreme Court case to support the imposition of penalty in situations where surrenders were not voluntary and where true income was concealed.

5. Ultimately, the Court found no error in the Tribunal's decision and dismissed the appeals, stating that no substantial question of law arose. The judgment reaffirmed the imposition of penalty under section 271(1)(c) based on the surrender of amount and discrepancies in the books of account, emphasizing the importance of full and true disclosure of income to avoid penalties under the Income Tax Act, 1961.