1999 (3) TMI 107 - AT - Income Tax

Summary

Issues Involved:
1. Allegation of concealment of income by the assessee-company.
2. Ownership and operation of the petrol bunk.
3. Applicability of penalties under section 271(1)(c) of the Income-tax Act, 1961.
4. Applicability of the Supreme Court decision in the case of Sir Shadilal Sugar & General Mills Ltd.

Detailed Analysis:

1. Allegation of Concealment of Income by the Assessee-Company:
The primary issue in this case pertains to the allegation that the assessee-company concealed income derived from a petrol bunk owned by it. The company did not show this income in its returns or during assessment proceedings for several years. The Assessing Officer discovered the existence of the petrol bunk during the assessment year 1983-84 and found that transactions related to the petrol bunk were not reflected in the company's books of account. The Managing Director of the company initially denied the operation of the petrol bunk by the company but later admitted that the licence was in the company's name and that the company owned the dealership with Indian Oil Corporation Ltd. (IOC).

2. Ownership and Operation of the Petrol Bunk:
The Assessing Officer found that IOC had supplied substantial materials to the assessee-company and that the invoices were raised in the company's name. The company had also claimed and been allowed depreciation on the petrol bunk's assets. Despite the company's claims that the petrol bunk was run by other entities (M/s. Janatha Tourist and later by Sri Sushilkumar Nanda), the evidence suggested that the company was the actual operator. The company's books did not reflect the petrol bunk's transactions, leading to the conclusion that the company had made investments in the petrol bunk outside its books.

3. Applicability of Penalties Under Section 271(1)(c) of the Income-tax Act, 1961:
Penalties under section 271(1)(c) were levied by the Assessing Officer for all the years under consideration due to the concealment of income from the petrol bunk. The CIT(A) canceled the penalties, noting that the petrol bunk was run by Shri Bharat Bhushan Narang (HUF), who had offered the income under the Amnesty Scheme, and that there was no concealment by the assessee-company. However, the Tribunal found that the assessee-company had not disclosed the income from the petrol bunk in its returns or assessments and had taken contradictory stands regarding the operation of the petrol bunk. The Tribunal concluded that the assessee-company had concealed its income and should be penalized under section 271(1)(c).

4. Applicability of the Supreme Court Decision in the Case of Sir Shadilal Sugar & General Mills Ltd.:
The CIT(A) had applied the Supreme Court decision in the case of Sir Shadilal Sugar & General Mills Ltd., which held that penalties should not be levied if the income was admitted for the purpose of buying peace. However, the Tribunal found that this decision did not apply to the present case as the assessee-company never admitted the income from the petrol bunk and continued to assert that the income belonged to others. The Tribunal disagreed with the CIT(A) and held that the assessee-company was liable for penalties for concealing income.

Conclusion:
The Tribunal reversed the CIT(A)'s order and restored the penalties for concealment of income under section 271(1)(c) for all the years under consideration, except for the assessment year 1978-79, where the penalty was directed to be computed based on the concealed income of Rs. 25,000 from the petrol bunk alone. The departmental appeals were allowed, and the penalties at minimal rates were restored for the other years.