CIT vs. Nalwa Sons Investment Ltd (Supreme Court) Explanation 4 to section 271(1)(c) of the Income-tax Act, 1961 provides for levy of penalty even in a situation which has the effect of reducing the loss declared in the return or converting that loss into income. The Apex Court in the ruling of Gold Coin Health Food (P.) Ltd. [2008] 304 ITR 308 (SC) had laid laid down the rationale that ‘the tax sought to be evaded’ will mean the tax chargeable not as if it was the total income.

Despite concealment, no s. 271(1)(c) penalty if s. 115JB book profits assessed

CIT vs. M/s Sangameshwara Associates (Karnataka High Court) The assessee filed a ROI offering Rs. 4.68 lakhs which was assessed. Subsequently, the AO issued a s. 148 notice claiming that cash credits of Rs. 4.50 lakhs had to be assessed. The assessed filed a ROI pursuant to the s. 148 notice in which it offered the said cash credits as income and the assessment was finalized on that basis. In the s. 271(1)(c) penalty proceedings, the assessee claimed that it was not liable for penalty on the ground that (i) the income offered in the ROI was accepted without any addition and so there was no concealment as per the ROI; (ii) the cash credits were offered as income to buy peace & (iii) that the AO had not recorded satisfaction that the assessee had concealed the income. The CIT (A) & Tribunal accepted the assessee’s claim. On appeal by the department to the High Court, HELD reversing the lower authorities:

Despite offer of income in s. 148 ROI, s. 271(1)(c) penalty leviable