2013 (1) TMI 630 - HC - Income Tax

Penalty u/s 271(1) (C)(iii) - appellant has transferred majority of his shares to a firm closely connected at a lower rate - the loss emanating from such deliberately chosen transaction of sale of shares is a false loss - Held that - As decided in CIT Vs. Sangrur Vanspati Mills Limited 2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT that for levy of penalty, there should be conclusive evidence that the assessee has concealed the particulars of income. Thus the tests specified therein are wholly satisfied in the present case. It is proved that the appellant has concealed the particulars of his income by giving inflated losses. Such finding of fact does not give rise to any substantial question of law - penalty confirmed - against assessee. Dismissed.

Issues:
1. Appeal against penalty imposed under Section 271(1)(C)(iii) of the Income Tax Act, 1961.
2. Justification of upholding penalty without appreciating actual sale consideration.
3. Perversity of the impugned order based on no evidence and extraneous considerations.

Issue 1: Appeal against Penalty:
The High Court heard arguments from both parties regarding the appeal against the penalty imposed under Section 271(1)(C)(iii) of the Income Tax Act, 1961. The Tribunal had dismissed the appeal of the assessee, leading to the present case. The appellant questioned the justification of upholding the penalty, arguing that the addition was made on a notional basis, presuming the sale at a certain rate, which did not reflect the actual sale consideration received. The appellant cited the distinction between quantum proceedings and penalty proceedings, emphasizing that the penalty should not be solely based on the quantum addition. However, the Court found no merit in the appeal.

Issue 2: Appreciation of Actual Sale Consideration:
The appellant had transferred shares to a closely connected firm at a lower rate compared to the prevailing stock exchange rate. The Commissioner of Income Tax deemed the resulting loss from this transaction as false, a finding upheld by the Tribunal. The Tribunal noted that the appellant's explanation for the sale at a lower rate was false and deliberate, aimed at claiming excessive loss. The Court emphasized that the appellant's conduct was evident from the transaction facts, indicating intentional misrepresentation. The Court upheld the Tribunal's finding that the deliberate loss shown by the appellant was a fact, not suffering from any legal flaws.

Issue 3: Perversity of Impugned Order:
The appellant argued that the impugned order upholding the penalty was based on no evidence and influenced by extraneous considerations. However, the Court disagreed, stating that the appellant had concealed income particulars by inflating losses, satisfying the necessary tests for penalty imposition. The Court referenced a previous judgment to support the conclusion that the appellant's actions amounted to concealing income details. Consequently, the Court dismissed the appeal, affirming the penalty imposed under Section 271(1)(C)(iii) of the Income Tax Act, 1961.

In conclusion, the High Court upheld the penalty imposed under Section 271(1)(C)(iii) of the Income Tax Act, 1961, finding no merit in the appellant's arguments regarding the justification of the penalty and the alleged perversity of the impugned order. The Court emphasized the deliberate nature of the loss shown by the appellant, based on the transaction details, and concluded that the appellant had concealed income particulars, justifying the penalty imposition.

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