1993 (9) TMI 144 - AT - Income Tax

Summary

Issues Involved:
1. Levy of Penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Concealment of Income and Furnishing Inaccurate Particulars.
3. Applicability of CBDT Circulars and Instructions.
4. Interpretation of "Income" including Loss.
5. Adequate Opportunity for Assessee to Explain Deposits.
6. Applicability of Judicial Precedents and Case Laws.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income-tax Act, 1961:
The assessee, a registered firm engaged in the business of 'Indigenous Bankers', was penalized under Section 271(1)(c) for concealment of income amounting to Rs. 2,11,39,972. The penalty was upheld by the CIT(A) and the ITAT, considering the assessee's failure to satisfactorily explain the increase in deposits amounting to Rs. 3,42,01,523.

2. Concealment of Income and Furnishing Inaccurate Particulars:
The Assessing Officer (AO) identified unexplained cash credits amounting to Rs. 5,71,98,216 under Section 68 of the Act. The assessee failed to provide details and evidence of the deposits, leading to the conclusion that the cash credits were not satisfactorily explained. The CIT(A) and ITAT upheld this view, confirming the concealment of income and furnishing of inaccurate particulars.

3. Applicability of CBDT Circulars and Instructions:
The assessee relied on CBDT's Circular No. F.No. 284/4/75-IT (Inv.), dated 16th October, 1975, which directed ITOs not to initiate penalty proceedings in certain cases. However, the CIT(A) and ITAT found that these instructions were not applicable to the present case, as the assessed income exceeded the maximum amount not chargeable to tax, and the directions were meant for small assessees and small additions.

4. Interpretation of "Income" including Loss:
The ITAT analyzed various judicial precedents and concluded that penalty under Section 271(1)(c) could be levied even when the returned and finally assessed income were losses. This interpretation was supported by Explanation 4(a) below Section 271(1)(c) and decisions such as CIT v. Harprasad & Co. (P.) Ltd., which held that "income" includes both positive and negative profits.

5. Adequate Opportunity for Assessee to Explain Deposits:
The assessee argued that it could not furnish details of deposits due to the large number of branches and financial difficulties. However, the CIT(A) and ITAT found that adequate opportunity was provided, and the assessee failed to substantiate its explanation or provide names and addresses of depositors. The explanation was deemed not bona fide, and the onus of proving the genuineness of the deposits was not discharged.

6. Applicability of Judicial Precedents and Case Laws:
The ITAT considered various case laws cited by both parties. The decisions relied upon by the assessee were found distinguishable due to changes in law over time. The ITAT upheld the penalty, relying on decisions such as India Sea Foods and J.H. Gotla, which supported the revenue's contention that penalty could be levied even when the assessed income was a loss.

Conclusion:
The ITAT dismissed the appeal, confirming the levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961. The assessee's explanations were not substantiated, and the penalty was deemed appropriate based on the concealment of income and furnishing of inaccurate particulars. The changes in law and judicial precedents were thoroughly analyzed, leading to the conclusion that penalty could be levied even when the returned and assessed incomes were losses.