1994 (7) TMI 109 - AT - Income Tax

Summary

Issues Involved:
1. Imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961 for concealment of income and furnishing inaccurate particulars of income.
2. The role of the Syndicate Bank as the General Power of Attorney Holder in preparing the income-tax return.
3. The assessee's responsibility in ensuring the accuracy of the return filed.
4. The applicability of penalties in cases of errors made by authorized agents.
5. The interpretation of "concealment" and "furnishing inaccurate particulars" under section 271(1)(c).

Issue-wise Detailed Analysis:

1. Imposition of penalty under section 271(1)(c):
The penalty of Rs. 5,70,000 was imposed by the Assessing Officer (AO) for the assessment year 1985-86 due to the concealment of income and furnishing inaccurate particulars. The AO identified significant discrepancies between the original return filed on 30-3-1988 and the revised return filed on 23-11-1990, which admitted a total income of Rs. 4,92,880. The discrepancies included non-disclosure of capital gains, incorrect depiction of income from proprietary business, and omission of interest income.

2. Role of Syndicate Bank:
The assessee argued that the discrepancies were due to errors made by the Syndicate Bank, which held the General Power of Attorney and was responsible for preparing the returns. The bank claimed that the returns were prepared based on information provided by the assessee and other gathered information. The AO and CIT(A) did not accept this explanation, holding the assessee responsible for verifying the accuracy of the returns before signing them.

3. Assessee's Responsibility:
The AO emphasized that the assessee, being an income-tax and wealth-tax payee for several years, had a duty to ensure the correctness of the returns before signing them. The CIT(A) agreed, noting that the primary responsibility for accurate disclosure of income lies with the assessee. The CIT(A) also highlighted that the failure to include capital gains was a conscious decision, possibly due to an expectation of exemption for investment in house property.

4. Penalties for Errors by Authorized Agents:
The Tribunal considered whether penalties should apply when errors are made by authorized agents. It was noted that the Syndicate Bank prepared the returns based on the information provided by the assessee. The Tribunal found that the errors were due to a lack of application of mind by the bank officials rather than any deliberate act by the assessee. The Tribunal referenced several case laws, including the Bombay High Court's decision in Lachman Chaturbhuj Java v. R. G. Nitsure, which held that an assessee should not be penalized for relying on professional advice in good faith.

5. Interpretation of "Concealment" and "Furnishing Inaccurate Particulars":
The Tribunal discussed the legal definitions of "concealment" and "furnishing inaccurate particulars." It concluded that these terms imply a conscious effort to hide income or provide false information. The Tribunal found that the errors in the assessee's returns were not due to any deliberate act but were the result of inadvertence and misapplication by the bank officials.

Conclusion:
The Tribunal held that the assessee was not guilty of concealment of income or furnishing inaccurate particulars under section 271(1)(c). The errors in the returns were attributed to the Syndicate Bank's lack of proper application of mind. The Tribunal reversed the orders of the lower authorities and canceled the penalty, stating that the assessee acted in good faith by relying on the professional expertise of the Syndicate Bank. The appeal filed by the assessee was allowed.