2009 (10) TMI 291 - HC - Income Tax

Penalty- Concealment of Income- It was observed by the Assessing officer that the firm is a bogus firm and the claim of the assessee that the amount was received towards consideration for sale of material was not accepted. Hence addition was made to be declared income. Further addition of lease rent and depreciation also made by the Assessing officer. Commissioner (Appeals) upheld the additions towards the sale of material but deleted in respect of lease rent and depreciation. Tribunal deleted both the additions. It also cancelled the penalty u/s 271(1)(c) of the Act. Held that- dismiss the appeal that as regards the deletion by the Commissioner (Appeals) after referring to the additional evidence led before him the Tribunal had examined the matter and recorded that a remand report was duly sought and thus no prejudice was caused by considering the additional evidence. Thus the order passed by Tribunal is final and cancellation of penalty is valid.

Issues:
Appeal by Revenue against cancellation of penalty under section 271(1)(c) of the Income-tax Act, 1961 for assessment year 1993-94.

Analysis:
1. The appeal was filed by the Revenue challenging the order of the Income-tax Appellate Tribunal canceling a penalty of Rs.76,97,423 levied under section 271(1)(c) of the Income-tax Act, 1961. The substantial question of law raised was whether the Tribunal was correct in canceling the penalty related to the addition of Rs.1,48,74,249 representing credit shown as receipts from a non-existent entity, M/s. Sahib Engineering Works, when the Revenue was already in appeal against the deletion of this addition on quantum.

2. During the assessment, it was found that the assessee received a significant amount from the bank account of M/s. Sahib Engineering Works, which was deemed a bogus firm. The Assessing Officer concluded that the money received was unaccounted for and added it to the declared income. Additionally, further additions were made regarding lease rent and depreciation allowance, which were later partially upheld by the Commissioner of Income-tax (Appeals).

3. The Tribunal upheld the assessee's plea regarding the amount received from M/s. Sahib Engineering Works but dismissed the Revenue's appeal concerning the deletions related to lease rent and depreciation allowance.

4. The court heard arguments from the appellant's counsel representing the Revenue.

5. The Revenue's counsel contended that the Tribunal's finding on the genuineness of the transaction was erroneous.

6. The Tribunal's decision was based on various circumstances, including the sale of steel by the assessee to M/s. Sahib Engineering Works, subsequent transactions involving other parties, and the settlement of legal disputes over lease rentals, all of which supported the genuineness of the transactions.

7. The court rejected the Revenue's contention, stating that the Tribunal's findings were based on evidence and could not be deemed non-existent. The Tribunal's role as the final fact-finding authority justified its inference.

8. Regarding the additional evidence considered by the Commissioner of Income-tax (Appeals), the Tribunal found that a remand report was requested, ensuring no prejudice to either party. The court emphasized that the sufficiency of reasons for admitting additional evidence should be evaluated case by case, and the Revenue's failure to raise objections earlier did not invalidate the decision.

9. Ultimately, the court concluded that no substantial question of law arose from the case and dismissed the appeal by the Revenue.

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