1992 (7) TMI 99 - AT - Income Tax

Summary

Issues Involved:
1. Penalties under Section 271(1)(c) for concealment of income.
2. Validity of the reassessment based on kachha and pacca books of accounts.
3. Justification of penalties by the Income Tax Officer (ITO).
4. Evaluation of the Appellate Assistant Commissioner (AAC) and Commissioner of Income Tax (Appeals) [CIT(A)] orders.
5. The role of the settlement by the Commissioner of Income Tax (CIT) in determining concealed income.

Detailed Analysis:

1. Penalties under Section 271(1)(c) for Concealment of Income:
The appeals pertain to penalties levied under Section 271(1)(c) for the assessment years 1977-78, 1978-79, 1979-80, and 1980-81. The penalties were imposed by the ITO for concealment of income as a consequence of reassessment proceedings initiated after a search conducted at the residence and business premises of the partners of the firm. The ITO found discrepancies between the kachha and pacca books of accounts, which revealed substantial concealment of income.

2. Validity of the Reassessment Based on Kachha and Pacca Books of Accounts:
The search revealed kachha and pacca sets of accounts maintained by the assessee, which according to the ITO, indicated substantial concealment of income. The reassessment was based on these findings, and the income was significantly increased from the original assessments. The reassessment was finalized, and penalties were levied based on the discrepancies found in these books.

3. Justification of Penalties by the Income Tax Officer (ITO):
The ITO justified the penalties by stating that the kachha and pacca books of accounts revealed substantial concealment of income. The ITO rejected the explanation offered by the assessee as unsatisfactory and levied penalties for concealment of income. The penalties were based on the materials contained in the assessment orders and the discrepancies found in the books of accounts.

4. Evaluation of the Appellate Assistant Commissioner (AAC) and Commissioner of Income Tax (Appeals) [CIT(A)] Orders:
- Assessment Years 1977-78 and 1978-79:
The AAC cancelled the penalties imposed by the ITO, stating that the reassessment was based on a settlement treating some expenses not supported by vouchers. The AAC pointed out that the ITO did not establish that the assessee obtained films without making payments in excess of Rs. 5,000. The addition made in the reassessment was based on guess estimates and did not represent deliberate concealed income. The AAC relied on various judgments and reasons to cancel the penalties.

- Assessment Years 1979-80 and 1980-81:
The CIT(A) passed a consolidated order, pointing out that the ITO did not make any addition of positive income other than the expenses disallowed for lack of supporting evidence. The CIT(A) concluded that the addition represented estimated expenditure and not deliberate concealment of income. The CIT(A) stated that the ITO failed to bring positive evidence to prove deliberate concealment and thus cancelled the penalties.

5. The Role of the Settlement by the Commissioner of Income Tax (CIT) in Determining Concealed Income:
The settlement by the CIT was crucial in determining the income for the relevant years. The CIT mentioned that the main point of dispute was regarding payments made to producers without supporting evidence. The assessee agreed to the determined income during the settlement. However, the settlement did not grant immunity from penalties. The CIT acknowledged that some expenditure was incurred but was not supported by evidence. The assessee's inability to produce vouchers was due to the producers not providing them, which led to the additional income being taken in reassessments.

Conclusion:
After careful consideration of the records and submissions, the Tribunal concluded that there was no difference between the kachha and pacca books except for the receipts being reduced in the pacca books, representing the expenditure for procuring 16mm films. There was no evidence brought on record to show that the assessee had any positive income or furnished inaccurate particulars of income. The penalties were levied based on the materials in the assessment orders without additional evidence. The Tribunal agreed with the findings and conclusions of the AAC and CIT(A), stating that there was no concealment of income and the penalties were not justified. The appeals were dismissed, and the orders cancelling the penalties were upheld.