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[2009] 180 Taxman 99 (Gujarat)/[2009] 309 ITR 450 (Gujarat) [2009] 180 TAXMAN 99 (GUJ.) HIGH COURT OF GUJARAT, AHMEDABAD BENCH Patel Chemicals Works* v. Assessing Officer D.A. MEHTA AND BANKIM N. MEHTA, JJ. TAX APPEAL NO. 772 OF 1999 SEPTEMBER 8, 2008 Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1982-83 - Whether in penalty proceedings, factum of very same income having been offered to tax by different entity and having been taxed substantially in hands of other entity becomes a relevant factor for determining whether assessee has concealed said income or furnished inaccurate particulars regarding said income which has already been taxed after being shown in hands of different entity, namely, other than assessee - Held, yes FACTS The Assessing Officer made an addition to the income returned by the assessee-firm on account of diversion of profits by the sham transactions with its sister concerns, as according to the Assessing Officer, the assessee had effected sales to three sister concerns at the prices which were lower than the prices charged by it to the other persons. On appeal, the appellate authorities and also the High Court confirmed the impugned addition made by the Assessing Officer. Thereafter, the Assessing Officer levied the penalty under section 271(1)(c) upon the assessee. On appeal, the Commissioner (Appeals) as well as the Tribunal upheld the penalty order. The Tribunal rejected the contention of the assessee that since the profits diverted by it to the sister concerns had already been assessed in the hands of the sister concerns, same could not be assessed again in its hands and, therefore, penalty could not be sustained under section 271(1)(c). On appeal to the High Court : HELD The contention raised by the assessee had been misconstrued by the Tribunal and dealt with as if the Tribunal was deciding the quantum appeal by referring to the various decisions, to hold that income is liable to be taxed in the hands of the right person regardless of whether the same income has been declared and taxed in the hands of a different person. Insofar as, the assessment proceedings are concerned,…

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