1986 (9) TMI 100 - AT - Income Tax

Summary

Issues:
- Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on undisclosed income.
- Validity of the penalty imposed by the Income Tax Officer (ITO) and upheld by the Appellate Assistant Commissioner (AAC).
- Appeal against the deletion of penalty by the AAC.

Analysis:

Issue 1: Imposition of penalty under section 271(1)(c) for undisclosed income
The case involved an individual assessee deriving income from various sources. The Income Tax Officer (ITO) added Rs. 24,000 as undisclosed income due to cash credits in the name of Miss Gauri Tulsi. The ITO concluded that the amount was concealed income not borrowed as claimed by the assessee. The ITO initiated penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961, due to the non-response of the assessee and imposed a penalty of Rs. 6,400 for concealing income or furnishing inaccurate particulars.

Issue 2: Validity of the penalty imposed
The Appellate Assistant Commissioner (AAC) deleted the penalty imposed by the ITO, citing that the penalty was mainly based on non-acceptance of the explanation, which is not sustainable. The AAC found that the explanation offered by the assessee was not false, and the addition was made in the quantum assessment for non-substantiating the explanation. The AAC referred to various judgments and held that no penalty for concealment could be levied solely based on additions made in the assessment order.

Issue 3: Appeal against the deletion of penalty
The Revenue appealed against the AAC's decision to delete the penalty. The Department argued that the AAC erred in deleting the penalty and relied on the ITO's order. The assessee's counsel contended that the AAC's decision was justified and should not be interfered with. The counsel argued that the explanation offered by the assessee was not false and that the penalty cannot be imposed for an omission.

Judgment and Conclusion:
The Tribunal held that the basis for imposing the penalty by the ITO did not meet the requirements of section 271(1)(c) of the Act. It was noted that the assessee had offered an explanation in the assessment proceedings, which was not found false by the authorities. The Tribunal found that the penalty was not sustainable as the assessee had proven the source of the cash credit. Therefore, the Tribunal upheld the AAC's decision to delete the penalty and dismissed the appeal.