2018 (8) TMI 990 - HC - Income Tax

Appeal Dismissed: No Concealment of Income. Penalty Deleted.

Principal Commissioner of Income Tax 7, Chennai Versus M.P. Purushothaman

Principal Commissioner of Income Tax 7, Chennai Versus M.P. Purushothaman - [2018] 407 ITR 689 (Mad) Issues Involved:1. Validity of additions/disallowances made by the Assessing Officer.2. Legitimacy of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.3. Evaluation of explanations provided by the assessee for various additions/disallowances.4. Examination of the substantial question of law for appeal under Section 260A of the Income Tax Act, 1961.Detailed Analysis:1. Validity of Additions/Disallowances:The Assessing Officer made various additions/disallowances to the respondent assessee's income, resulting in an assessed income of Rs. 1,04,67,100/-. These included:- Loan obtained in 1988-89 shown as a gift in the assessee's capital account: Rs. 40,80,000.- Loan from creditors added as unexplained Cash Credits under Section 68: Rs. 39,62,212.- Rental income from group company: Rs. 6,75,000.- Disallowance of interest and commission: Rs. 2,35,125.- Disallowance of depreciation: Rs. 45,933.2. Legitimacy of Penalty Proceedings:The Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961, and levied a penalty of Rs. 31,61,994/- for concealing income and furnishing inaccurate particulars. The Commissioner of Income Tax (Appeals) [CIT (A)] and the Income Tax Appellate Tribunal (ITAT) both found that the respondent assessee had not concealed income or furnished inaccurate particulars, leading to the deletion of the penalty.3. Evaluation of Explanations Provided by the Assessee:- Addition under Section 41(1)(a): The CIT (A) observed that the amounts had already been declared over the years, and thus, penalty under Section 271(1)(c) was not warranted.- Unexplained Cash Credits under Section 68: The CIT (A) noted that the unsecured creditors included an NRI loan creditor whose identity, creditworthiness, and genuineness were accepted by the Assessing Officer. Since these additions were opening balances, penalty was not leviable.- Addition of Rental Income: The CIT (A) found reasonable cause for the omission of rental income due to the timing of the company's audit.4. Examination of Substantial Question of Law:The Revenue raised the question of whether the ITAT was correct in deleting the penalty under Section 271(1)(c) when the Tribunal had upheld the additions to the income. The High Court examined whether there was a substantial question of law involved under Section 260A of the Income Tax Act, 1961. The Court found no substantial question of law, as the findings of the CIT (A) and the ITAT were based on factual determinations that the respondent assessee had not concealed income or furnished inaccurate particulars.Conclusion:The High Court dismissed the Revenue's appeal, holding that there was no substantial question of law involved. The Court affirmed the findings of the CIT (A) and the ITAT that the respondent assessee had not concealed income or furnished inaccurate particulars, and thus, the deletion of the penalty under Section 271(1)(c) was justified. The appeal was dismissed with no costs.