Bombay High Court rejects Revenue's penalty application under Income-tax Act, 1961. No concealment proven.

The High Court of Bombay dismissed the Revenue's application seeking direction to refer questions regarding the cancellation of penalty under section 271(1)(c) of the Income-tax Act, 1961 for concealed income for the assessment years 1977-78 and 1979-80. The Court upheld the Tribunal's decision, stating that no penalty could be imposed based solely on a settlement offer, as there was no evidence of concealed income apart from the offer. The Court found that the Revenue failed to prove concealment, emphasizing that no factual basis existed for assuming concealment. The application was dismissed, and no costs were awarded.

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Issues involved: Application u/s 256(2) of the Income-tax Act, 1961 seeking direction to refer questions regarding cancellation of penalty u/s 271(1)(c) for concealed income.

Summary:
The High Court of Bombay heard an application u/s 256(2) of the Income-tax Act, 1961, where the Revenue sought direction to refer questions regarding the cancellation of penalty u/s 271(1)(c) for concealed income. The assessment years in question were 1977-78 and 1979-80. The assessee made a conditional offer for settlement after discrepancies were found in stock records during an investigation initiated u/s 132 of the Act. The Assessing Officer added the offered sums to the income but initiated penalty proceedings u/s 271(1)(c) despite lack of evidence of concealed income apart from the settlement offer. The Commissioner reduced the penalty, and the Tribunal held that the Revenue failed to prove concealment. The High Court, citing precedent, found no factual basis for assuming concealment and upheld the Tribunal's decision, stating no penalty could be imposed based solely on the settlement offer.

The High Court concluded that no referable question of law arose, as the Tribunal's finding that the Revenue failed to prove concealment was a reasonable view. The Court emphasized that the assumption of concealment in the referred questions lacked factual basis, and the penalty could not be imposed based solely on the settlement offer. The application by the Revenue was dismissed, and no costs were awarded.

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