2010 (4) TMI 142 - HC - Income Tax

Penalty - concealment of income - The Assessing Officer treating the business loss claimed by the assessee as speculative loss made addition and also treated Rs. 4 lakh and Rs. 19 lakhs received by assessee as unexplained income of the assessee under section 68 of the Income Tax Act, 1961. These additions were confirmed by the Tribunal and the appeal preferred therefrom was dismissed by the High Court. In the penalty proceedings under section 271(1)(c) of the Act, the Assessing Officer imposed a penalty of Rs. 32,89,552. The penalty was confirmed by the commissioner (Appeals), however the Tribunal deleted the penalty. Held that- dismissing the appeal as change of treatment from business loss as claimed by the assessee to speculative loss as determined by the Assessing officer, the Tribunal was of the view that a mere change of treatment of the loss would not amount to concealment under section 271(1)(c) of the Act.

Summary

Issues:
1. Quantum proceedings additions - business loss treated as speculation loss and unexplained income under section 68
2. Penalty imposed under section 271(1)(c) for the above additions
3. Tribunal's decision to delete the penalty

Analysis:

Issue 1: Quantum Proceedings Additions
In the assessment year 1994-95, the Assessing Officer made additions to the appellant's income on two grounds: treating business loss as speculation loss and considering Rs. 4 lakhs and Rs. 19 lakhs as unexplained income under section 68. The Tribunal upheld these additions, which were confirmed by the High Court.

Issue 2: Penalty Imposed under Section 271(1)(c)
The Assessing Officer imposed a penalty of Rs. 32,89,552 under section 271(1)(c) for the above additions. The Commissioner of Income-tax (Appeals) upheld the penalty, but the Income-tax Appellate Tribunal deleted it. The Tribunal ruled that changing the treatment of the loss from business to speculation did not amount to concealment under section 271(1)(c). Regarding the amounts of Rs. 4 lakhs and Rs. 19 lakhs, the Tribunal found no concealment under the said section.

Issue 3: Tribunal's Decision to Delete the Penalty
The Tribunal concluded that the explanation provided by the appellant for the amounts of Rs. 4 lakhs and Rs. 19 lakhs was bona fide. For the Rs. 19 lakhs addition under section 68, the Tribunal noted the loan confirmation provided by the appellant and the statement of the director of the lending company. Despite doubts raised by the Assessing Officer, the Tribunal found the appellant's explanation to be bona fide and deleted the penalty.

In summary, the High Court dismissed the appeal, upholding the Tribunal's decision to delete the penalty imposed under section 271(1)(c) for the additions made in the quantum proceedings. The Tribunal's findings on the facts of the case were deemed sufficient, and no substantial question of law arose for consideration in this matter.