1982 (8) TMI 14 - HC - Income Tax

Summary

Issues Involved:
1. Justification of penalty imposition under section 271(1)(c) of the Income-tax Act, 1961.
2. Jurisdictional validity of the Inspecting Assistant Commissioner (IAC) to levy the penalty.
3. Procedural correctness in the imposition of penalty.

Issue-wise Detailed Analysis:

1. Justification of Penalty Imposition under Section 271(1)(c):
The primary issue was whether the Income-tax Appellate Tribunal was justified in holding that the imposition of a penalty of Rs. 25,000 under section 271(1)(c) for the assessment year 1970-71 was justified. The assessee, an individual with income from commission, share of profits, and director's remuneration, filed a return declaring an income of Rs. 34,250. During assessment, the ITO found that the minor sons of the assessee had filed returns showing income from share dealings and speculation, which the ITO added to the assessee's income, initiating penalty proceedings under section 271(1)(c). The IAC, upon referral, levied a penalty of Rs. 25,000, which was upheld by the Tribunal. The Tribunal concluded that the minors were incapable of carrying on such specialized business and were benamidars of the assessee, thus justifying the penalty.

2. Jurisdictional Validity of the IAC to Levy the Penalty:
The assessee contended that the ITO could refer the case to the IAC only if the amount of concealment exceeded Rs. 25,000, as per the amendment to section 271(1)(c) read with section 274(2). The return was filed on April 30, 1971, and the assessment order was passed on March 14, 1973. The assessee argued that the initiation of penalty proceedings must have occurred after March 31, 1971, making the referral to the IAC misconceived. However, the court noted that the ITO had added back more than Rs. 29,000 to the income disclosed by the assessee, giving the ITO jurisdiction to refer the case to the IAC. The court held that the contention regarding the ITO's jurisdiction was not raised before the IAC or the Tribunal, and thus could not be entertained at this stage.

3. Procedural Correctness in the Imposition of Penalty:
The assessee argued that the procedural aspect of the imposition of penalty was flawed, as the ITO did not have a concealment amount exceeding Rs. 25,000 in mind when referring the case to the IAC. The court, however, found that this argument was not raised before the Tribunal and was not investigated. The Tribunal's focus was on whether there was concealment of income, not on the procedural correctness of the penalty imposition. The court emphasized that questions not raised or considered by the Tribunal cannot be entertained subsequently. The court referred to the principle established in CIT v. Scindia Steam Navigation Co. Ltd., which states that a question of law can only be considered if it was raised before and dealt with by the Tribunal.

Conclusion:
The court concluded that the Tribunal was justified in holding that the imposition of a penalty of Rs. 25,000 under section 271(1)(c) for the assessment year 1970-71 was justified. The court dismissed the procedural and jurisdictional arguments raised by the assessee, stating they were not raised before the Tribunal and did not arise out of the Tribunal's order. The question was answered in the affirmative, in favor of the Revenue, with each party bearing their own costs.