1986 (7) TMI 70 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of Inspecting Assistant Commissioner to levy penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Validity of the levy of penalty under section 271(1)(c).

Analysis:

Issue 1:
The case involved a reference under section 256(1) of the Income-tax Act, 1961 regarding the jurisdiction of the Inspecting Assistant Commissioner to levy penalty under section 271(1)(c). The Tribunal referred two questions to the High Court, one being the validity of the Tribunal's decision on the jurisdiction issue. The court examined the reference made by the Income-tax Officer to the Inspecting Assistant Commissioner before the amendment deleting section 274(2) of the Act. The court upheld the Tribunal's decision, stating that the reference made under section 274(2) before its deletion was valid, even if there was no prescribed form for such references. The court emphasized that the crucial factor was the initiation of proceedings by the Income-tax Officer, not the timing of sending the record to the Inspecting Assistant Commissioner. Therefore, the court affirmed the Tribunal's decision on the jurisdiction issue.

Issue 2:
The second question related to the validity of the penalty levy under section 271(1)(c) based on the Tribunal's finding that the business conducted under a different name was the benami business of the assessee. The Tribunal established that the business was indeed the assessee's, leading to a charge of concealment of income. The court agreed with the Tribunal's conclusion that the assessee attempted to conceal income by diverting it through the benami business. Despite a reduction in the amount of addition to income, the court upheld the penalty levy at Rs. 10,000. The court found that the Revenue had successfully proven the concealment of income, supporting the validity of the penalty imposition. Consequently, the court ruled in favor of the Revenue on both issues, affirming the Tribunal's decisions.

In conclusion, the High Court upheld the jurisdiction of the Inspecting Assistant Commissioner to levy penalty under section 271(1)(c) and deemed the penalty levy valid based on the established concealment of income by the assessee. The court's detailed analysis and application of relevant legal provisions resulted in a judgment in favor of the Revenue on both issues, with each party bearing its own costs in the reference.