2018 (11) TMI 1792 - HC - Income Tax

Revision u/s 263 - Gross profit addition - HELD THAT - There can be no doubt that so long as the view taken by the AO is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. The calculation of the Gross Profit was made by the AO and the assessee agreed to the additions made. We are therefore of the view that the changes suggested by the CIT invoking the revisional jurisdiction under Section 263 of the Act is not sustainable. Penalty u/s 271(1)(c) - conscious attempt on the part of the assessee to destroy accounts - only consequent to the survey that the assessee had filed return of income and shown an additional income of 23 lakhs - HELD THAT - Section 271(1)(c) of the Act imposes strict liability on the assessee for concealment of income. There is no doubt that in the instant case there was concealment by the assessee. The mere fact that he had consented to the additions made would not exonerate the assessee from the liability to pay penalty. The penalty has been reduced to 200% by the Tribunal. We do not intend to interfere with that finding of the Tribunal. Question of law raised pertaining to the assessment proceedings is answered in favour of the assessee; and that of imposition of penalty is answered in favour of the Revenue and against the assessee.

Summary

Issues:
1. Assessment proceedings - Error in calculation of gross profit.
2. Assessment proceedings - Commissioner's jurisdiction under Section 263 of the Act.
3. Penalty proceedings - Imposition of penalty under Section 271(1)(c) of the Act.
4. Penalty proceedings - Reduction of penalty by the Tribunal.

Assessment Proceedings - Error in Calculation of Gross Profit:
The case involved an assessee operating a bar attached hotel who filed an income tax return for the assessment year 2006-07. During a survey, incriminating documents revealed discrepancies in the Gross Profit percentage compared to the filed returns. The Assessing Officer (AO) made additions to the income, which the assessee agreed to. The Commissioner of Income Tax invoked Section 263 of the Act, directing a fresh assessment due to discrepancies in the Gross Profit calculation. The Tribunal upheld the assessment but reduced the penalty imposed by the Commissioner. The Tribunal's decision was challenged, questioning the correctness of the AO's assessment and the penalty imposed.

Assessment Proceedings - Commissioner's Jurisdiction under Section 263 of the Act:
The Commissioner found errors in the Gross Profit calculation and directed a fresh assessment, disagreeing with the AO's findings. The Tribunal endorsed the Commissioner's decision, except on hidden expenditure and the penalty rate. However, the High Court held that the Commissioner could not substitute his reasoning for the AO's, especially when the AO's view was a possible one. The Court emphasized that revisional powers should not be used when multiple views are possible. It was concluded that the changes suggested by the Commissioner were not sustainable, and the AO's assessment was upheld.

Penalty Proceedings - Imposition of Penalty under Section 271(1)(c) of the Act:
The Commissioner imposed a penalty of 300% due to the assessee's attempt to conceal income and falsify accounts. The AO had made additions to the income, and the Tribunal agreed that there was a conscious attempt to destroy accounts. The Tribunal, however, reduced the penalty to 200% considering the assessee's cooperation with the additions made. The High Court upheld the penalty imposition, stating that the strict liability under Section 271(1)(c) applied to the assessee for concealment of income, regardless of their agreement to the additions.

Penalty Proceedings - Reduction of Penalty by the Tribunal:
The Tribunal reduced the penalty to 200% despite agreeing with the Commissioner on the imposition of penalty. The High Court affirmed the Tribunal's decision, stating that the reduction was justified based on the assessee's cooperation with the additions. The Court did not interfere with the Tribunal's finding on the penalty reduction. Ultimately, the High Court ruled in favor of the Revenue regarding the imposition of penalty and against the assessee, while favoring the assessee in the assessment proceedings.