2011 (10) TMI 466 - AT - Income Tax

Levy of Penalty - unexplained payments stand explained out of unaccounted donations - educational institutions collected donations- 60% are shown as income and 40% not disclosed - undisclosed income is utilized either for giving advances to builders which is also undisclosed or used for personal use of trustees or their relatives . - Held that - the mere fact that the quantum additions have been confirmed per se does not imply that this explanation cannot be treated as acceptable for the penalty purposes either. Thus penalty was not levied. Tax effect does not exceed CBDT instructions - Revenue authorities not justified to appeal

Summary

Issues: Whether penalties under section 271(1)(c) of the Income Tax Act, 1961, were justified in the assessment years 1989-90 and 1990-91.

Analysis:
1. The appeals involved common issues related to penalties under section 271(1)(c) of the Income Tax Act, 1961, for the assessment years 1989-90 and 1990-91. The main issue was whether the penalties imposed on the assessee were justified.

2. The assessee, an educational society, faced penalties for unexplained payments and donations. The Assessing Officer imposed penalties based on additions made during assessment proceedings. The assessee contended that the donations were voluntary and the unexplained payments were sourced from unaccounted donations for school building purposes. The CIT(A) accepted the explanations for both years, leading to the deletion of penalties.

3. The Tribunal reviewed the facts, legal positions, and explanations provided by the assessee. It noted that the undisclosed income was used for various purposes, including advances to builders and personal use, as per the assessment order of the Trustees of Lawrence Education Society for the assessment year 1989-90. The Tribunal found no issue in accepting the assessee's explanation during the penalty proceedings, even if revenue authorities had a different stance during assessment.

4. For the assessment year 1990-91, the tax effect involved was less than Rs 3,00,000, making it impermissible for revenue authorities to challenge relief granted by the CIT(A) per CBDT instructions. Therefore, the challenge to CIT(A)'s findings for this year lacked legal merit. Considering all aspects of the case, the Tribunal approved the CIT(A)'s conclusions and declined to interfere with the matter.

5. Ultimately, the Tribunal dismissed the appeals, affirming the CIT(A)'s decisions. The judgment was pronounced on October 21, 2011.