2008 (4) TMI 5 - SC - Income Tax

Higher authority: lower body exceeded reference jurisdiction by finding facts perverse without referral; s.271(1)(c) penalty not exigible.

SC held HC exceeded its reference jurisdiction by declaring the Tribunal's factual findings perverse where no such question was framed or referred; ... Levy of penalty u/s 271(1)(c) - finding of the Tribunal on facts is perverse - HELD THAT:- Relying upon the two judgments of this Court in K. Ravindranathan Nair v. Commissioner of Income Tax, [2000 (11) TMI 3 - SUPREME COURT] and T. Ashok Pai v. Commissioner of Income Tax, [2007 (5) TMI 199 - SUPREME COURT], it was contended that the High Court exceeded its jurisdiction in coming to the conclusion that the finding recorded by the Tribunal were perverse as no question of law to that effect had been either claimed or referred by the Tribunal to the High Court for its opinion. Question as to perversity of the findings recorded by the Tribunal on facts was neither raised nor referred to the High Court for its opinion. The Tribunal is the final court of fact. The decision of the Tribunal on the facts can be gone into by the High Court in the reference jurisdiction only if a question has been referred to it which says that the finding arrived at by the Tribunal on the facts is perverse, in the sense that no reasonable person could have taken such a view. In reference jurisdiction, the High Court can answer the question of law referred to it and it is only when a finding of fact recorded by the Tribunal is challenged on the ground of perversity, in the sense set out above, that a question of law can be said to arise. Since the frame of the question was not as to whether the findings recorded by the Tribunal on facts were perverse, the High Court was precluded from entering into any discussion regarding the perversity of the finding of fact recorded by the Tribunal. Accordingly, the Orders under appeal are set aside and that of the CIT (Appeals) and Tribunal restored. It is held that, penalty under Section 271(1)(c) was not exigible. The appeals are accepted with costs. Issues Involved:1. Legality of the penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Jurisdiction of the High Court in overturning the Tribunal's findings.3. Applicability of Section 132(4) read with Explanation 5 to Section 271(1)(c) of the Act.Issue-wise Detailed Analysis:1. Legality of the penalty under Section 271(1)(c) of the Income Tax Act, 1961:The case revolves around the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment years 1984-85 to 1987-88. A search conducted on the assessee's premises revealed concealment of income, leading to the filing of revised returns by the assessee. The Assessing Officer levied the maximum penalty under Section 271(1)(c), rejecting the assessee's contention that a promise had been made not to levy the penalty. The CIT (Appeals) and the Tribunal, however, found that the revised returns were filed to 'purchase peace,' and no books or documents proving concealment for earlier years were discovered. Consequently, they set aside the penalty. The High Court later reversed this, deeming the findings perverse and holding that penalty was indeed exigible.2. Jurisdiction of the High Court in overturning the Tribunal's findings:The Supreme Court emphasized that the Tribunal is the final fact-finding authority, and its decision on facts can be reviewed by the High Court only if a question is referred that specifically challenges the findings as perverse. In this case, the High Court overstepped by concluding the findings were perverse without such a question being referred. The Supreme Court cited precedents (K. Ravindranathan Nair v. Commissioner of Income Tax and T. Ashok Pai v. Commissioner of Income Tax) to underline that the High Court should not disturb the Tribunal's factual findings unless explicitly challenged on grounds of perversity.3. Applicability of Section 132(4) read with Explanation 5 to Section 271(1)(c) of the Act:The CIT (Appeals) and the Tribunal noted that the additional income was declared under the impression of Section 132(4) and to avoid litigation, not due to actual concealment discovered for earlier years. The Tribunal inferred that an inducement must have been given by the search party, leading the assessee to offer higher incomes for several years. The Tribunal's findings suggested that the revised returns were filed in good faith and without sufficient documentary evidence of concealment for earlier years, making the penalty under Section 271(1)(c) inapplicable.Conclusion:The Supreme Court set aside the High Court's order, restoring the CIT (Appeals) and Tribunal's decision that no penalty under Section 271(1)(c) was exigible. The High Court had exceeded its jurisdiction by addressing the perversity of the Tribunal's findings without a specific question to that effect. The appeals were accepted with costs, reaffirming the Tribunal's role as the final fact-finding authority.