2019 (10) TMI 780 - SC - Income Tax

Supreme Court overturns High Court judgment in income tax case, clarifies non-disclosure issue

The Supreme Court allowed the appeal, overturning the High Court's judgment in an income tax matter. The Court disagreed with the High Court's ... Undisclosed income of the Assessee as recorded by the Securities and Exchange Commission in USA - HC proceeded to reverse the finding of fact recorded by the Appellate Tribunal who deleted the addition - HELD THAT:- We have perused the two letters which had weighed with the High Court. Our analysis of the said letters is that, they had been in refutal of the allegations contained in the news items which were published around that time, when the communication was sent by the assessee to the Department with an explanation and a without-prejudice offer. Such communication(s) cannot be treated as admission of non-disclosure as such. What is significant to note is that in the present case, the disclosure is attributed to Goodyear Tyre & Rubber Co., USA, filed by it in the proceedings in USA; and not by the assessee as such. It is not the case of the Department that the amount referred to in the said disclosure has been received in the accounts of the assessee or spent for and on behalf of the appellant – assessee under instruction, so as to be treated as undisclosed income of the appellant. As aforesaid, the two communications relied upon by the High Court cannot be taken as admission of non-disclosure nor being a case of unconditional offer to pay tax in that behalf. On the other hand, we find that the ITAT had exhaustively analyzed the entire evidence, including the two letters and taken a view which, in our opinion, is a possible view. That being purely a finding of fact, no interference was warranted. Accordingly, these appeals must succeed and the same are allowed. The impugned judgment of the High Court is set aside and instead the judgment of ITAT is restored Issues:Appeal against High Court judgment allowing Department's appeal on deletion of undisclosed income of assessee based on ITAT's decision.Analysis:The Supreme Court heard an appeal challenging the High Court's judgment in an income tax matter. The High Court had reversed the Income Tax Appellate Tribunal's finding that there was no non-disclosure by the assessee. The High Court focused on letters from the assessee to the Income Tax Department, interpreting them as admissions of non-disclosure and willingness to pay tax and penalty. However, the Supreme Court disagreed with this interpretation. The Court noted that the disclosure was actually made by Goodyear Tyre & Rubber Co., USA, not the assessee. The Court found that the letters were responses to news items and did not constitute admissions of non-disclosure. The ITAT's analysis, which concluded there was no non-disclosure, was considered a valid view based on evidence. Therefore, the Supreme Court allowed the appeal, setting aside the High Court's judgment and reinstating the ITAT's decision.The main issue revolved around whether the Income Tax Appellate Tribunal was correct in deleting the undisclosed income of the assessee, as recorded by the Securities and Exchange Commission in the USA. The High Court reversed the ITAT's finding, relying on letters from the assessee to the Income Tax Department. The High Court considered these letters as admissions of non-disclosure and willingness to pay tax and penalty. However, the Supreme Court disagreed, emphasizing that the disclosure was made by Goodyear Tyre & Rubber Co., USA, not the assessee. The Court found that the letters were responses to news items and did not amount to admissions of non-disclosure. The Supreme Court upheld the ITAT's decision, stating that it was a valid view based on evidence, and allowed the appeal.In reaching its decision, the Supreme Court analyzed the letters from the assessee to the Income Tax Department, which the High Court had relied upon. The Court determined that these letters were not admissions of non-disclosure but rather responses to news items. The Court highlighted that the disclosure was made by Goodyear Tyre & Rubber Co., USA, not the assessee. The Supreme Court concluded that the ITAT had thoroughly examined the evidence, including the letters, and its decision was a reasonable one. Therefore, the Court set aside the High Court's judgment and reinstated the ITAT's decision, allowing the appeal.