1992 (11) TMI 117 - AT - Income Tax

Summary

Issues Involved:
1. Imposition of penalty under section 271(1)(c) for the assessment years 1980-81 and 1981-82.
2. Justification for the penalty related to agency commission.
3. Justification for the penalty related to rent, electricity, and water charges.
4. Justification for the penalty related to payment to Shri C. L. Madhok.
5. Legality of proceedings under section 147 of the Income-tax Act, 1961.
6. Applicability of the Amnesty Scheme.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The core issue in both appeals was the imposition of penalty under section 271(1)(c). The Assessing Officer imposed penalties for alleged concealment of income, which included agency commission, rent, electricity, water charges, and payment to Shri C. L. Madhok. The CIT(A) confirmed the penalties but on the grounds of filing inaccurate particulars rather than concealment of income.

2. Justification for Penalty Related to Agency Commission:
The assessee received commission for supplying materials on behalf of its principals to the Government of India. The commission was split into 80% received during the year and 20% retained in a suspense account pending final inspection. The Assessing Officer added the 20% commission to the income for the year, which was later deleted on appeal. The assessee filed a revised return under the Amnesty Scheme and paid tax on the additional income. The Tribunal held that the 20% commission did not accrue during the year, and the mere submission of a revised return under the Amnesty Scheme did not imply concealment or filing of inaccurate particulars. The Tribunal relied on precedents, including decisions from the Supreme Court and various High Courts, which supported the view that income not accrued during the year could not be penalized.

3. Justification for Penalty Related to Rent, Electricity, and Water Charges:
The assessee claimed the entire expenditure on a rented flat as business expenditure. However, it was found that a director lived in the flat, and only one-fourth of the expenditure was allowed as business expenditure. The Tribunal, referencing the Delhi High Court decision in CIT v. Rita Mathotra, concluded that such disallowance did not amount to concealment of income but was a difference of opinion between the assessee and the Assessing Officer. Consequently, no penalty was leviable on this disallowance.

4. Justification for Penalty Related to Payment to Shri C. L. Madhok:
The CIT(A) held that the penalty could not be levied on the payment to Shri C. L. Madhok as the matter was still unresolved and had been sent back to the Assessing Officer for further consideration.

5. Legality of Proceedings Under Section 147 of the Income-tax Act, 1961:
The assessee argued that there was no escapement of income within the meaning of section 147, and any proceedings, including the imposition of the penalty, were against the law. The Tribunal did not explicitly address this issue in detail, focusing instead on the merits of the penalty itself.

6. Applicability of the Amnesty Scheme:
The Tribunal found that the submission of a revised return under the Amnesty Scheme was not an admission of concealment or filing of inaccurate particulars. The Tribunal emphasized that the Amnesty Scheme allowed taxpayers to regularize their returns for various reasons, including purchasing peace with the department, without necessarily implying guilt of concealment.

Conclusion:
The Tribunal allowed the appeal, deleting the penalties imposed under section 271(1)(c). It concluded that the alleged income from the agency commission did not accrue during the year, and the disallowance of rent, electricity, and water charges was a matter of opinion rather than concealment. The submission of a revised return under the Amnesty Scheme did not equate to an admission of concealment or filing inaccurate particulars. The Tribunal also noted that the CIT(A) could not change the basis of the penalty from concealment to filing inaccurate particulars, referencing the Gujarat High Court decision in CIT v. Lakhdhir Lalji.