1992 (3) TMI 53 - HC - Income Tax

Issues Involved:
1. Legality of the order dated August 6, 1990, passed by the Assistant Commissioner of Income-tax under section 132(5) of the Income-tax Act.
2. Legality of the order dated March 7, 1991, passed by the Commissioner of Income-tax under section 132(12) of the Income-tax Act.
3. Determination of the amount of penalty under section 271(1)(c) of the Income-tax Act.
4. Applicability of Explanation 5 to section 271(1)(c) of the Income-tax Act.
5. Compliance with Circular No. Admn. I/Misc. 130/88-89, dated June 17, 1988, issued by the Chief Commissioner of Income-tax (Administration).

Detailed Analysis:

1. Legality of the Order Dated August 6, 1990:
The petitioner challenged the order passed by the Assistant Commissioner of Income-tax under section 132(5) of the Act, which estimated the petitioner's income at Rs. 43,62,705, calculated the tax at Rs. 23,31,664, and determined the penalty imposable under section 271(1)(c) at Rs. 23,31,664. The Assistant Commissioner ordered the retention of the seized cash as the total tax liability exceeded the cash seized. The court found that the Assessing Officer acted within his powers under section 132(5), which allows for the estimation of undisclosed income, calculation of tax, and determination of penalty in a summary manner.

2. Legality of the Order Dated March 7, 1991:
The petitioner also challenged the order of the Commissioner of Income-tax under section 132(12), which upheld the order of the Assistant Commissioner. The court noted that the Commissioner had the authority to pass such an order after providing an opportunity for a hearing, as per section 132(12). The court found no illegality in the Commissioner's order.

3. Determination of the Amount of Penalty under Section 271(1)(c):
The petitioner contended that no penalty was imposable under section 271(1)(c) as the petitioner had disclosed the income under section 132(4) and was eligible for immunity from penalty. The court examined whether the conditions for imposing a penalty under section 271(1)(c) were met. The court found that the Assessing Officer had correctly determined the penalty based on the undisclosed income and that the petitioner had not satisfactorily explained the source of the income.

4. Applicability of Explanation 5 to Section 271(1)(c):
The petitioner argued that Explanation 5 to section 271(1)(c) should apply, providing immunity from penalty. The court considered whether the conditions of Explanation 5 were satisfied. The court noted that the petitioner had made a statement under section 132(4), admitting the undisclosed income and expressing willingness to pay the tax. However, the court found that the Assessing Officer doubted the correctness of the petitioner's statements and the diary entries, concluding that the income represented undisclosed income from previous years as well. Therefore, the court held that Explanation 5 did not apply to the entire amount seized.

5. Compliance with Circular No. Admn. I/Misc. 130/88-89:
The petitioner claimed that the respondents' actions were contrary to the instructions in the circular issued by the Chief Commissioner of Income-tax. The court did not find merit in this argument, as the circular did not override the statutory provisions of the Act. The court upheld the orders of the Assessing Officer and the Commissioner, finding them to be proper and legal.

Conclusion:
The court dismissed the petition, discharging the rule with no order as to costs. The court upheld the orders of the Assistant Commissioner and the Commissioner, finding that the determination of the penalty and the retention of the seized cash were legal and within the powers conferred by the relevant sections of the Income-tax Act.

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