1991 (6) TMI 39 - HC - Income Tax

Summary

Issues: Interpretation of section 271(1)(c) of the Income-tax Act, 1961 regarding penalty for concealing income.

The judgment involved a question regarding the interpretation of section 271(1)(c) of the Income-tax Act, 1961, specifically focusing on whether the Tribunal was justified in interfering with the order of the Inspecting Assistant Commissioner concerning the penalty for concealing income. The Inspecting Assistant Commissioner had imposed a penalty of Rs. 75,000, while the Appellate Tribunal reduced it to Rs. 5,500, based on their assessment of the concealed income. The key issue revolved around the correct quantification of the penalty under section 271(1)(c) based on the concealed income.

The Inspecting Assistant Commissioner had initially imposed a penalty of Rs. 75,000 on the assessee for concealing income amounting to Rs. 62,755. The Appellate Tribunal, while agreeing that there was concealment of income, reduced the penalty to Rs. 5,500, stating that the concealed income was only Rs. 5,500. The Tribunal's decision was based on the interpretation that the penalty should be linked to the specific amount of income concealed, as per the provisions of section 271(1)(c). However, the High Court found that the Tribunal had erred in its assessment and that the penalty should be linked to the actual concealed income amount, as per the Division Bench ruling in CIT v. India Sea Foods [1976] 105 ITR 708. The High Court held that the Tribunal's interference with the penalty amount was not sustainable and ruled in favor of the Revenue, directing that the penalty should be based on the actual concealed income amount, as determined by the Inspecting Assistant Commissioner.

The Division Bench ruling cited in the judgment clarified that the penalty under section 271(1)(c) should be quantified based on the amount of income in respect of which there was concealment or furnishing of inaccurate particulars. The ruling emphasized that the penalty should not be linked to the total income assessed but specifically to the amount of concealed income. The High Court applied this interpretation to the case at hand, concluding that the Tribunal's decision to reduce the penalty based on a different concealed income amount was incorrect. The judgment highlighted the importance of aligning the penalty amount with the actual concealed income as per the provisions of the Income-tax Act, 1961.