1983 (5) TMI 40 - AT - Income Tax

Issues Involved:
1. Unexplained deposits in the bank accounts.
2. Imposition of penalty under Section 271(1)(c) of the IT Act, 1961.
3. Determination of whether the assessee's actions constituted fraud, gross, or willful neglect.

Detailed Analysis:

1. Unexplained Deposits in the Bank Accounts:
The assessee disclosed three items in Part 3 of the return, which were not to be included in the total income: a deposit of Rs. 49,000 in the name of his wife, interest of Rs. 1,008, and a deposit of Rs. 2,000 in the Central Bank. The Income Tax Officer (ITO) accepted Rs. 12,000 out of earlier withdrawals but held that Rs. 35,000 remained unexplained. Upon appeal, the unexplained deposits were reduced to Rs. 13,000. This amount comprised Rs. 8,000 from the sale proceeds of the cloth business and Rs. 5,000 from the sale of jewelry belonging to the assessee's mother-in-law, which lacked evidence.

2. Imposition of Penalty under Section 271(1)(c):
The ITO initiated penalty proceedings under Section 271(1)(c) for concealment of income. The penalty amount was Rs. 27,000, based on the unexplained deposits as determined by the Assistant Appellate Commissioner (AAC). The CIT (A) later canceled this penalty, concluding that the assessee had disclosed all relevant facts and cooperated with the revenue authorities. The CIT (A) found that the additions were due to a difference of opinion rather than fraud or gross or willful neglect.

3. Determination of Fraud, Gross, or Willful Neglect:
The departmental representative argued that the Explanation to Section 271(1)(c) was automatically attracted because the total income shown in the return was less than 80% of the assessed total income. It was contended that the onus was on the assessee to prove that the failure to return the correct income did not arise from fraud or gross or willful neglect. The representative cited several rulings to support the imposition of penalty for unexplained deposits treated as income from undisclosed sources.

On the other hand, the assessee's counsel argued that the deposits were disclosed in Part 3 of the return, showing the assessee's bona fides. The counsel referred to the notice under Section 139(2) and the ruling of the Hon'ble Supreme Court in the Cement Marketing Co. of India Ltd. case, which suggested that raising a bona fide contention should not attract penalty. The counsel also cited other rulings to argue that the assessment of an item as income does not automatically establish concealment or furnishing of inaccurate particulars.

Tribunal's Conclusion:
The Tribunal agreed with the CIT (A) and held that the Explanation to Section 271(1)(c) was indeed attracted, and the onus was on the assessee to show that the failure to return the correct income did not arise from fraud or gross or willful negligence. However, it was noted that the assessee had disclosed the deposits in Part 3 of the return and that a significant portion of the deposits was satisfactorily explained during the assessment proceedings. The remaining Rs. 13,000, which was not satisfactorily explained, involved a difference of opinion regarding the sale proceeds of the cloth business and the sale of jewelry.

The Tribunal emphasized that where a difference of opinion exists, no penalty for concealment or furnishing inaccurate particulars can lie. The Tribunal also referred to the advice in the notice under Section 139(2) and the ruling of the Hon'ble Supreme Court, concluding that the assessee's actions did not constitute fraud or gross or willful neglect. Therefore, the onus under the Explanation to Section 271(1)(c) was discharged, and the penalty was rightly canceled by the CIT (A).

Final Judgment:
The appeal filed by the revenue was dismissed, and the penalty under Section 271(1)(c) was canceled.

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