2017 (3) TMI 1248 - HC - Income Tax

Penalty under section 271(1)(c) - non disclosure of the income for assessment year - Held that - Income Tax Officer included the amount of ₹ 24,600/in the total income of the assessee for the assessment year 1950-51 and imposed penalty under the provisions of the Income Tax Act, 1922 though in the books of accounts relating to November 1948, certain cash credits aggregating to ₹ 24,600/were found. The High Court held in the aforesaid set of facts that the entries aggregating to the amount of ₹ 24,600/being made in the assessment year 1948-49 and the relevant assessment year being assessment year 1949-50, no penalty could be imposed on the assessee for non disclosure of the income for the assessment year 1950-51. - Decided in favour of the assessee

Summary

Issues:
1) Whether the penalty levied on the appellant under section 271(1)(c) of the Income Tax Act was justified.
2) Whether the difference in stock should have been considered for the assessment year 1992-93 or 1993-94.
3) Whether the tribunal erred in reversing the order of the Commissioner (Appeals).

Issue 1:
The appellant, a partnership firm operating a bar and restaurant, faced a penalty under section 271(1)(c) of the Income Tax Act due to a difference in stock value discovered during a survey. The Assessing Officer added the stock difference amount to the income of the relevant assessment year and initiated penalty proceedings. The appellant argued that the omission was not deliberate, and the amount offered was to avoid litigation. The Commissioner (Appeals) ruled in favor of the appellant, stating no concealment of income occurred. However, the Income Tax Appellate Tribunal reversed this decision, leading to the appellant's challenge.

Issue 2:
The crux of the matter revolved around determining whether the difference in stock should be attributed to the assessment year 1992-93 or 1993-94. The Commissioner (Appeals) reasoned that the stock difference related to the previous year, 1992-93, and not the relevant year, 1993-94. The tribunal, however, failed to consider this critical aspect and solely focused on the penalty provision under section 271(1)(c). The High Court highlighted the importance of correctly assessing the stock difference for the appropriate year to avoid penalties for non-disclosure.

Issue 3:
The High Court scrutinized the tribunal's decision to reverse the Commissioner (Appeals)'s order. It emphasized that the tribunal overlooked the reasons provided by the Commissioner (Appeals) for allowing the appellant's appeal. The court stressed the necessity for the appellate authority to consider the subordinate authority's rationale when overturning a decision. By emphasizing the factual and legal position, the High Court concluded that the stock difference belonged to the previous assessment year, absolving the appellant of any concealment or suppression of income in the relevant year, 1993-94. The court referenced a similar case to support its decision, emphasizing the importance of accurate assessment and penalty imposition based on the correct assessment year.

In conclusion, the High Court ruled in favor of the appellant, setting aside the tribunal's order and confirming the Commissioner (Appeals)'s decision. The judgment underscored the significance of correctly attributing financial discrepancies to the appropriate assessment year to avoid unwarranted penalties under the Income Tax Act.