2003 (1) TMI 237 - AT - Income Tax

Summary

Issues Involved:
1. Whether the CIT(A) erred in not deleting the penalty levied under Section 271(1)(c) of the IT Act, 1961, for the assessment years 1987-88 and 1988-89.

Issue-wise Detailed Analysis:

1. Non-deletion of Penalty under Section 271(1)(c):

The assessee filed appeals against the orders of the CIT(A) for the assessment years 1987-88 and 1988-89, challenging the penalty levied under Section 271(1)(c) of the IT Act, 1961. The original assessments were completed under Section 143(1) on 24th Nov., 1987, and 12th Nov., 1990, respectively. The assessee claimed to have received gifts during these years, but upon investigation, discrepancies were found.

Gifts Received and Investigation:
The assessee claimed to have received gifts from multiple donors, most of whom were residents of Calcutta. However, during an investigation by the Calcutta GTO, it was found that one of the donors, Smt. Chandrakala Agarwal, did not disclose the gift in her return of income and denied making any gift to the assessee. Similar discrepancies were found with other donors, including some who denied knowing the assessee or whose signatures did not match those on the affidavits filed by the assessee. Summons issued to several donors returned unserved, and in some cases, donors who confirmed the gifts had deposited equivalent amounts of cash into their bank accounts immediately before issuing the cheques.

Reopening of Assessments:
Due to these discrepancies, the assessments were reopened by issuing notices under Section 148. The assessee, in response, filed returns including the gifts as income under the head "other sources," claiming the surrender was voluntary to avoid further litigation and maintain good relations with friends and relatives. The AO, however, concluded that the returns were filed only after the inquiries were almost finalized and that the assessee had concealed the particulars of income.

Penalty Proceedings:
The AO levied a penalty at the rate of 200% of the tax sought to be evaded, which was later reduced to 100% by the CIT(A). The CIT(A) observed that the assessee surrendered the gifts only after inquiries commenced and filed revised returns consequent to the issue of notice under Section 148. The CIT(A) noted that the case was mainly a rejection of the explanation without the AO having brought on record material to establish that these amounts represented the assessee's funds. However, the CIT(A) upheld the penalty to the extent of 100% of the tax sought to be evaded.

Arguments by the Assessee:
The assessee contended that the additional income declared in the return filed in response to the notice under Section 148 was voluntary and to buy peace and avoid litigation. The assessee argued that no penalty should have been levied, relying on several judicial precedents, including CIT vs. Kiran & Co., CIT vs. Baroda Tin Works, and CIT vs. J.V. Appadurai Chettlar Co.

Arguments by the Department:
The Department argued that the offer of additional income was not voluntary but was made after the detection by the Revenue. The detailed inquiry conducted revealed that the claim of gifts was false and incorrect, and the assessee had concealed particulars of income.

Tribunal's Decision:
The Tribunal found no merit in the assessee's claim that the additional income declared was voluntary. The Tribunal observed that the additional income was declared after the detection by the Revenue and detailed inquiry. The Tribunal noted that the AO had brought material on record to show that the claim of gifts was false and incorrect. The Tribunal also found that the case law relied upon by the assessee was not applicable to the facts of the present case. The Tribunal upheld the CIT(A)'s decision to levy a penalty to the extent of 100% of the tax sought to be evaded and dismissed the appeals filed by the assessee.

Conclusion:
The Tribunal concluded that the assessee had concealed particulars of income and was liable for penalty under Section 271(1)(c). The appeals filed by the assessee were dismissed, and the penalty levied by the CIT(A) was upheld.