1991 (12) TMI 85 - AT - Income Tax

Summary

Issues Involved:
1. Leviability of penalty under section 271(1)(c) of the Income-tax Act for the assessment years 1977-78, 1978-79, 1979-80, and 1980-81.
2. Determination of the nature of disallowances (whether they constitute concealment of income).
3. Applicability of Explanation to section 271(1)(c).
4. Consideration of the assessee's voluntary disclosure and settlement petitions.
5. Relevance of previous judicial decisions and their applicability to the present case.
6. Departmental appeals against the CIT(A)'s decision on specific additions for penalty purposes.

Detailed Analysis:

1. Leviability of Penalty under Section 271(1)(c):
The primary issue concerns the leviability of penalties amounting to Rs. 3,42,000, Rs. 2,20,470, Rs. 2,16,000, and Rs. 2,32,000 for the relevant assessment years. The penalties were levied due to disallowance of expenses claimed by the assessee, a film artist, which were added to her total income as a result of a settlement between her and the Department. The assessee argued that these disallowances were not due to concealment of income but were made on an estimate basis following a settlement petition.

2. Nature of Disallowances:
The assessee contended that the disallowances were normal business expenses, such as donations, service expenses, dance training, costumes, salaries, postage, car expenses, and traveling. These were disallowed on the grounds that they were not incurred for business purposes. The Tribunal noted that there was no finding that the expenses were inflated or non-genuine, and the disallowances were made purely on an estimate basis.

3. Applicability of Explanation to Section 271(1)(c):
The CIT(A) invoked Explanation 1 to section 271(1)(c), observing that the assessee had offered additional income over and above the returned amount, which he considered concealment. However, the Tribunal found that the penalties could not be sustained as the additions were based on a settlement petition and not due to any specific finding of concealment of income or furnishing of inaccurate particulars.

4. Voluntary Disclosure and Settlement Petitions:
The assessee had made a voluntary disclosure of Rs. 25 lakhs in 1975 and later filed petitions for settling disallowances of expenses for the years 1970-71 to 1980-81. The Tribunal highlighted that the settlement petition dated 13-10-1980 and the subsequent petition under section 273A(4) were aimed at amicably resolving tax matters, including disallowances of expenses. The Tribunal noted that the order on the settlement petition was not available, making it unclear whether the Commissioner had exempted the assessee from penalties.

5. Judicial Precedents:
The Tribunal relied on several judicial decisions to support its findings:
- Supreme Court in Sir Shadilal Sugar & General Mills Ltd. v. CIT: Held that agreeing to additions does not imply concealed income.
- Bombay High Court in CIT v. Haji Gaffar Haji Dada Chini: Assessee's offer of certain credits did not amount to an admission of concealment.
- Calcutta High Court in Girdharilal Soni v. CIT and National Alloy & Metal Works (P.) Ltd.: Additions agreed upon by the assessee do not automatically constitute concealed income.
- Madhya Pradesh High Court in CIT v. Punjab Tyres: Department must prove concealed income with independent evidence.

6. Departmental Appeals:
The Department appealed against the CIT(A)'s decision not to consider certain additions while levying penalties. The Tribunal dismissed these appeals, reiterating that the penalties could not be sustained on the facts and circumstances of the case. The Tribunal emphasized that the disallowances were made as part of a settlement and did not represent concealed income.

Conclusion:
The Tribunal concluded that the penalties levied under section 271(1)(c) for the assessment years 1977-78, 1978-79, 1979-80, and 1980-81 could not be sustained. The disallowances were part of a settlement agreement and did not constitute concealed income. The Department's appeals were also dismissed, affirming that there was no basis for sustaining any penalties.