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2011 (7) TMI 665 - AT - Income TaxWhether additions in the assessment or the fact that the assessee did not file appeal can be the basis for levy of penalty - Held that - Penalty proceedings are different from assessment proceedings as held in the case of Anantharam Veerasinghaiah & Co. v. CIT (1980 - TMI - 5836 - SUPREME Court) and the findings given in the assessment are not conclusive in the penalty proceedings in which it is open to the assessee to prove that there was no concealment of income. Each case has to be evaluated on its own facts and the case of penalty has to be considered under the provisions of Explanation (1) to section 271(1)(c). Where unaccounted donations were based on statements of assessee which were retracted later The retraction of the trustee has not been found reliable by the authorities below as the trustee had clearly stated that unaccounted donations were received and therefore retraction was considered after thought. Further, finally the assessee accepted the addition on account of unaccounted donations by not filing further appeal in the High Court and therefore, the retraction has no relevance. It is also to be noted that the seized documents revealed unaccounted transactions which also support the statement of the trustee that a part of donations received were not accounted. Under these circumstances, the explanation of the assessee that there were no unaccounted donations cannot be considered bona fide.
Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Years 1989-90 and 1990-91. Detailed Analysis: Background and Facts: The appeals by the revenue challenge the orders dated 17.10.2008 of CIT(A) for the Assessment Years 1989-90 and 1990-91 regarding the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961. The assessee, an Educational Trust registered under section 12A of the Act, had declared nil income for both years. However, the original assessments determined total incomes of Rs. 86,72,180/- and Rs. 1,19,34,400/- respectively. After various appeals and reassessments, the final incomes were assessed at Rs. 22,44,691/- and Rs. 11,47,533/- respectively. Issue 1: Basis for Penalty Levied by Assessing Officer: The Assessing Officer initiated penalty proceedings for concealment of income under section 271(1)(c). The assessee contended that the additions were based on the trustee's retracted statement and lacked corroborative materials. The explanations provided for various additions (unaccounted donations, cash deposits, payments to Mr. Mansoor Virani, notings in diaries, and donations given) were not accepted by the Assessing Officer, who levied penalties at 100% of the tax sought to be evaded. Issue 2: CIT(A)'s Decision: The CIT(A) observed that there was a difference of opinion at every stage, and the additions were based on explanations provided by the assessee, which were not conclusively disproved. CIT(A) noted that penalty proceedings are distinct from assessment proceedings and held that the penalty under section 271(1)(c) was not justified, thereby deleting the penalties for both years. Issue 3: Tribunal's Consideration: The Tribunal examined whether the levy of penalty for concealment of income was justified. It noted that penalty proceedings are separate from assessment proceedings and that willful concealment need not be proved by the revenue. The Tribunal evaluated the case under Explanation 1 to section 271(1)(c), which deems certain additions/disallowances as concealed income if the assessee fails to offer a bona fide explanation. Tribunal's Findings: 1. Unaccounted Donations and Cash Deposits: The explanations provided by the assessee were not substantiated with evidence, and the Tribunal found the explanations to be non-bona fide. 2. Payments to Mr. Mansoor Virani: The assessee admitted these payments were unaccounted and claimed they were from unaccounted donations, which contradicted the assertion of no unaccounted donations. 3. Notings in Diaries: The explanations were not supported by evidence, and the Tribunal considered them non-bona fide. 4. Donations Given: These were accounted for in the books, and the additions were made only due to the denial of exemptions under sections 11 and 12. The Tribunal held that penalties were not appropriate for these additions. Tribunal's Conclusion: The Tribunal held that the assessee had concealed particulars of income for the additions confirmed by the Tribunal, except for the additions related to donations given. It rejected the argument that the debatable nature of the additions exempted the assessee from penalties, noting that the debatable issue was only regarding the applicability of section 10(22) and not the merit of the additions. The Tribunal upheld the penalties for the concealed income, as tax was found payable in relation to the concealed income, and set aside the order of CIT(A) deleting the penalties. Result: The appeals of the revenue were partly allowed, upholding the penalty in relation to the additions confirmed by the Tribunal except for the additions on account of donations given.
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