2011 (2) TMI 58 - HC - Income Tax

Court dismisses appeals challenging penalties under Income Tax Act, emphasizing lack of evidence.

The High Court dismissed the appeals challenging penalties imposed under section 271(1)(c) of the Income Tax Act, 1961. The Court upheld the findings that ... Surrender of income – penalty - Sales of share as long term capital gain - no evidence available with the Investigation Wing that the Assesses had taken bogus entries of long-term capital gains - proceedings were dropped - assessees surrendered income after the notice under section 148 does not necessarily mean that he is within the clutches of section 271 (1)(c) of the Act – Appeal dismissed Issues:Appeal against Income Tax Appellate Tribunal order for penalty under section 271(1)(c) of the Income Tax Act, 1961 based on surrender of income after notice under section 148.Analysis:The appeals before the High Court were against the order of the Income Tax Appellate Tribunal (the Tribunal) dated 10.7.2009 concerning different Assessees who are family members, for various years from 1999-00 to 2001-02. The assessees initially reported sales of shares as long-term capital gains but later surrendered part of the income following a notice under section 148 of the Income Tax Act, 1961. Subsequently, penalty proceedings under section 271(1)(c) were initiated against them.The Assessing Officer upheld the notice and imposed penalties on the assessees, leading them to file appeals. The Commissioner (Appeals) sought a remand report and eventually allowed the appeals. However, the Income Tax Department (the Department) challenged this decision by filing an appeal before the Tribunal, which resulted in the dismissal of the appeals and subsequently led to the present appeal before the High Court.During the proceedings, the High Court heard arguments from both parties' counsels. The Tribunal, after examining the evidence on record, upheld the Commissioner (Appeals)'s findings that there was no evidence from the Investigation Wing suggesting that the assessees had engaged in any fraudulent activities related to long-term capital gains. This lack of evidence led to the dropping of the penalty proceedings.The High Court emphasized that the mere act of an assessee surrendering income after receiving a notice under section 148 does not automatically implicate them under section 271(1)(c) of the Act. The Court concluded that the appeals lacked merit and subsequently dismissed them, affirming the decision of the Tribunal.