1990 (2) TMI 92 - AT - Income Tax

Summary

Issues:
1. Imposition of penalty under section 271(1)(c) of the IT Act, 1961 for concealment of income.
2. Interpretation of provisions under section 271(1)(c) regarding penalty for concealment.
3. Application of Explanation 1 to section 271(1)(c) in justifying the imposition of penalty.

Detailed Analysis:
1. The Department appealed against the cancellation of a penalty of Rs. 1,50,000 imposed on the assessee under section 271(1)(c) of the IT Act, 1961 for the assessment year 1978-79. The dispute arose from the addition of Rs. 4,96,121 on account of unexplained investment in the construction of a cinema auditorium. The CIT(A) had cancelled the penalty, leading to the Department's appeal.

2. The Tribunal considered the provisions of section 271(1)(c) which authorize the levy of penalty for concealment of income. It was noted that penalty can only be imposed if there is conscious and deliberate concealment by the assessee, as established in the case law CIT vs. ANWAR ALI (1970) 76 ITR 696 (SC). Mere addition to income does not automatically justify a penalty; there must be evidence showing the amount represents the assessee's income. In this case, the addition was based on the discrepancy in the cost of certain items, but it was not proven that the amount added was indeed the assessee's income.

3. The Tribunal further analyzed the application of Explanation 1 to section 271(1)(c) in justifying the penalty. It was emphasized that the explanation offered by the assessee, though not accepted by the Department, was not proven to be false. The Department's estimation of higher expenditure did not establish deliberate concealment. Since the assessee's explanation was not found to be false, the case fell under clause (B) of Explanation 1. The Proviso to Explanation 1 also supported the assessee's case as the explanation was deemed bona fide, and all relevant facts were disclosed. Consequently, the Tribunal upheld the CIT(A)'s decision to cancel the penalty, concluding that the imposition of penalty was not justified under the circumstances.

Cross Objection:
The cross objection filed by the assessee merely supported the CIT(A)'s decision. Given the dismissal of the Department's appeal and the justification for canceling the penalty, the cross objection was deemed infructuous and dismissed by the Tribunal. Ultimately, both the Department's appeal and the assessee's cross objection were dismissed.