Where the assessee discloses all the facts truly, no penalty can be levied for concealment of income – Bombay HC

 The Metal Rolling Works Ltd. V/s. Commissioner of Income Tax

Bombay High Court
INCOME TAX APPEAL (LOD) NO. 966 of 2011

DATED: 11TH OCTOBER, 2011

JUGMENT (PER J.P. DEVADHAR, J.)

1. Heard. The appeal is admitted on the following (re-framed) question of law :-

“ Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the penalty of Rs. 3,44,40,616/- levied on the appellant under Section 271(1)(c) of the Income Tax Ac t, 1961 ? ”

2. By consent of the parties, the appeal is taken up for final hearing.

3. The assessment year involved herein is AY 2002-03.

4. The relevant facts are that on 24/8/2001 the assessee had entered into a Memorandum of Understanding (MoU) with M/s. Maitri Associates for development of its property. Thereafter, a formal land development agreement was entered into by and between the parties on 21/3/2002. As per the MOU and the land development agreement, the assessee was to receive Rs. 6 crores upfront and balance in the form of 40% of sale proceeds to be received on construction and sale of the flats.

5. In the audited profit and loss account, the balance sheet and the audit report dated 28/10/2002, relating to AY 2002-03, the receipt of Rs.6 crores was shown as advance against the sale of property. It may be noted that while seeking approval from the Appropriate Authority, the assessee in Form No.37-I had estimated the consideration receivable under the MOU / Agreement at Rs.14,01,64,316/-. In the return of income filed for the assessment year 2002-03 on 31/10/2002, the amount of Rs.6 crores was not offered to tax. Even amount disclosed to the Appropriate Authority was not offered to tax. However, a note appended to the Balance Sheet read thus:-

“ The company has, with an objective to turn its net worth, entered into a property development agreement for its land, against which, it has received an advance payment of 6 crores ”.