1995 (7) TMI 109 - AT - Income Tax

Summary

Issues:
- Appeal against cancellation of penalty under section 271(1)(c)
- Whether the assessee concealed income by denying ownership of seized amount
- Applicability of Explanation 5 to section 271(1)(c) in the case of requisitioning assets under section 132A

Analysis:
1. The appeal was filed against the cancellation of a penalty of Rs. 60,000 under section 271(1)(c) by the department. The case revolved around the seizure of Rs. 1 lakh from the assessee by the Directorate of Revenue Intelligence, which was later requisitioned by the IT Department. The assessee initially denied ownership of the amount but later included it as income under section 69A in the return filed in response to a notice under section 139(2). The penalty was imposed for alleged concealment of income due to contradictory statements made by the assessee during the proceedings.

2. At the first appellate stage, the CIT(A) accepted the assessee's plea that since the amount was declared in the income tax return, there was no concealment of income. The CIT(A) also ruled out the applicability of Explanations (3) and (5) to section 271(1)(c) in this case, leading to the cancellation of the penalty.

3. During the appeal, the department argued that the initial denial of ownership by the assessee constituted concealment of income, and Explanation 5 to section 271(1)(c) should be applied to hold the assessee liable for the penalty. However, the Tribunal noted that concealment should be judged based on the returned income, which included the disputed amount declared by the assessee. Therefore, concealment could not be established in this case.

4. The Tribunal further analyzed the applicability of Explanation 5 to section 271(1)(c) concerning requisitioning of assets under section 132A. It clarified that Explanation 5's reference to a search under section 132 did not extend to cases under section 132A, which deals with requisitioning of assets by departments other than the IT department. The Tribunal highlighted that the procedural differences between sections 132 and 132A precluded the application of Explanation 5 in cases like the present one.

5. Considering the lack of applicability of Explanation 5 to section 271(1)(c) in cases of requisitioning assets under section 132A, the Tribunal upheld the CIT(A)'s decision to cancel the penalty. The judgment emphasized the importance of distinguishing between search and seizure proceedings under section 132 and requisitioning of assets under section 132A, concluding that the penalty was not warranted in this instance.

6. Ultimately, the Tribunal dismissed the department's appeal, affirming the cancellation of the penalty under section 271(1)(c) imposed on the assessee.