2002 (9) TMI 251 - AT - Income Tax

Summary

Issues Involved:
1. Levying of penalty u/s 271(1)(c) of the Income-tax Act.
2. Application of Explanation 5(a) of section 271(1)(c) for immunity from penalty.
3. Consideration of seized diaries as books of account.

Summary:

Levying of Penalty u/s 271(1)(c):
The assessee, a Cardio Vascular Surgeon, had his residential premises searched u/s 132 of the Act, leading to the reopening of assessments for the years 1981-82 to 1988-89. The assessee filed revised returns disclosing additional income based on seized diaries. The Assessing Officer initiated penalty proceedings u/s 271(1)(c), concluding that the additional income constituted concealed income, as it was not disclosed in the original returns filed u/s 139(1). Penalties were levied for the assessment years 1982-83, 1985-86, and 1988-89.

Application of Explanation 5(a) of Section 271(1)(c) for Immunity:
The assessee contended that no penalty for concealment was attracted as his case was covered by the immunity granted by Explanation 5(a) of section 271(1)(c). The CIT(A) rejected this argument, stating that Explanation 5 applies only when assets are found during a search, not merely incriminating documents or diaries. Furthermore, the CIT(A) noted that the assessee did not maintain books of account as prescribed u/s 44AA read with Rule 6F, and thus, the immunity under Explanation 5 was not available.

Consideration of Seized Diaries as Books of Account:
The Tribunal examined whether the seized diaries could be considered as books of account for the purpose of immunity under Explanation 5(a). It was determined that the diaries, which contained rough entries, deletions, and overwritings, did not qualify as books of account maintained for computing taxable income. The Tribunal referenced the Supreme Court's definition of "books" and concluded that the diaries were personal records, not intended for determining income for tax purposes. The Tribunal also cited the Bombay High Court's decision in Sheraton Apparels, which held that private diaries maintained for recording unaccounted transactions do not qualify as books of account under Explanation 5.

Conclusion:
The Tribunal upheld the penalties levied by the Department, rejecting the assessee's claim for immunity under Explanation 5(a) of section 271(1)(c). The appeals were dismissed.