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2002 (11) TMI 41 - HC - Income Tax1. Whether Tribunal was right in law in cancelling the penalty levied under section 271(1)(c) of the Income-tax Act 1961 for the assessment year 1980-81? and 2. Whether on the facts and in the circumstances of the case the Tribunal was right in law in failing to appreciate the fact that the assessee s acceptance of the income assessed was not a voluntary one? - It is not a case where the Appellate Tribunal was not conscious of the applicability of Explanation 1 to section 271 of the Act but it is a case where the Appellate Tribunal found that Explanation 1 to section 271(1) of the Act would be applicable and the Appellate Tribunal proceeded on the basis and held that there was no concealment of income. Since the Appellate Tribunal has proceeded on the basis and held that there was no concealment of income we hold that the finding is a finding of fact. Accordingly we answer both the questions of law referred to us in the affirmative against the Revenue and in favour of the assessee.
Issues Involved:
1. Whether the Tribunal was right in law in cancelling the penalty levied under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 1980-81? 2. Whether the Tribunal was right in law in failing to appreciate the fact that the assessee's acceptance of the income assessed was not a voluntary one? Detailed Analysis: Issue 1: Cancellation of Penalty under Section 271(1)(c) The Tribunal's decision to cancel the penalty levied under section 271(1)(c) was based on the following considerations: - Assessment and Additions: The assessee's income was initially determined at Rs. 14,076 ex parte, but upon appeal and fresh assessment, it was revised to Rs. 4,81,320 with specific additions, including lease rent, sundry cash credits, personal expenses, jewellery investment, and a loan from Century Investment Corporation. - Penalty Proceedings: The Assessing Officer initiated penalty proceedings under section 271(1)(c) on the grounds of concealment of income, particularly focusing on the loan from Century Investment Corporation and unexplained investment in jewellery. - Explanation and Amnesty Scheme: The assessee explained that the additions were offered under the Amnesty Scheme to settle with the Department. However, the Assessing Officer dismissed this explanation, stating that the case was not covered by the Amnesty Scheme and levied a penalty of Rs. 3,21,510. - Tribunal's Reliance on Precedents: The Tribunal relied on the Supreme Court decision in Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 and CIT v. Pioneer Engineering Syndicate [1991] 188 ITR 287, concluding that the Department had not made a case for penalty under section 271(1)(c). - Revenue's Argument: The Revenue contended that the Tribunal's reliance on Shadilal Sugar's case was misplaced due to the Supreme Court's later decision in K.P. Madhusudhanan v. CIT [2001] 251 ITR 99, which invalidated the earlier precedent after the addition of the Explanation to section 271. - Court's Analysis: The court analyzed the Explanation to section 271, emphasizing that the Revenue must prove that the explanation offered by the assessee was false or unsubstantiated. The court noted the lack of such findings by the Assessing Officer and the Commissioner of Income-tax (Appeals). - Conclusion: The court concluded that the Tribunal's decision to cancel the penalty was correct, as the Revenue failed to establish concealment of income under the revised legal framework post-K.P. Madhusudhanan's case. Issue 2: Voluntariness of Assessee's Acceptance of Income The Tribunal's failure to appreciate whether the assessee's acceptance of the assessed income was voluntary was scrutinized as follows: - Assessee's Position: The assessee accepted the additions to purchase peace with the Department, which was initially believed to be under the Amnesty Scheme. - Revenue's Position: The Revenue argued that the acceptance of the additions was not voluntary and indicated concealment of income. - Court's Consideration: The court noted that the Assessing Officer did not consider whether the explanation offered by the assessee was bona fide or whether all facts were disclosed. The Tribunal's decision was based on the absence of findings that the explanation was false or unsubstantiated. - Conclusion: The court held that the Tribunal's conclusion that there was no concealment of income was a finding of fact, and thus, the Tribunal's failure to appreciate the voluntariness of the acceptance did not affect the overall decision to cancel the penalty. Final Judgment: The court affirmed the Tribunal's decision to cancel the penalty under section 271(1)(c) and held that the Tribunal was correct in its findings. Both questions of law were answered in the affirmative, against the Revenue and in favor of the assessee. No costs were awarded.
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