The Bombay High Court while allowing a reference application in favour of the Revenue, held that voluntary disclosure in all cases cannot absolve the assessee from penal liabilities under Section 271(1)(c) of the Income Tax Act.
The assessee in instant case had sold a movie to M/s. Prakash Pictures on minimum guarantee basis for Rs.13, 70,000/- , filed a return amounting to Rs.3,90,917/-, during the AY 1977-78 and the same was reopened under section 147(a) of the Income Tax Act, 1961.
During the assessment reopened assessee returned an income of Rs.4, 98,530/- as against the earlier returned loss and the AO observed that an addition made by him was upheld by revenue. Therefore penalty of Rs.6, 46,588/- was levied under Section 271(1)(c) of the Income Tax Act.
The Commissioner of Income Tax (Appeals) cancelled this penalty on the ground that since the assessee had shown the balance income and there was no concealment. However, on further appeal, the Tribunal restored the penalty.
On further appeal, the Tribunal held that non-availability of the agreement does not mean that the nature of the transaction cannot be disclosed. If the assessee had declared a loss, he thwarted his tax liability for two years by not declaring the entire receipts in the assessment year 1977-78.
Ms. Sathe submitted that there is absolutely no question of concealment because the assessee may treat the amount as an advance or a minimum guarantee and also added that there was at best a technical default which neither resulted in any benefit to the assessee nor was there any loss to the Revenue. Hence, this was not a case where the penalty could have been imposed.
On the other hand, Mr. Chhotaray appearing on behalf of the Revenue submitted that the penalty has been rightly imposed. He would submit that it was imposed for nondisclosure/non-filing of materials and relevant particulars.
The bench comprising of Justice S.C.Dharmadhikari and Justice Prakash.D.Naik concluded that the court need not refer to the other judgments cited by Mr. Chhotaray but his reliance on an unreported judgment of the Hon’ble Supreme Court, rendered in the case of Mak Data P. Ltd. vs. Commissioner of Income Tax-II6 was equally accurate.
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