1983 (6) TMI 57 - AT - Income Tax

Summary

Issues:
Assessee's liability for penalty u/s. 271(1)(c) of the IT Act for failure to disclose capital gains earned during the relevant accounting year.

Detailed Analysis:
The dispute in this case revolves around the assessee's liability for penalty under section 271(1)(c) of the IT Act for failing to disclose certain capital gains earned during the relevant accounting year. The Income Tax Officer (ITO) observed that there was a concealment of income and issued a notice to the assessee to show cause as to why a penalty should not be imposed. The assessee claimed ignorance regarding the inclusion of capital gains in the total income, stating it was unintentional. However, the ITO found this explanation insufficient and imposed a penalty of Rs. 8,000.

Upon appeal, the Appellate Assistant Commissioner (AAC) acknowledged that the assessee's explanation was not entirely acceptable but deemed it plausible. The AAC highlighted that penalty proceedings are quasi-criminal in nature and require substantial evidence of deliberate tax evasion. In this case, the AAC found the evidence lacking and consequently deleted the penalty. Subsequently, the revenue challenged this decision in a second appeal.

During the appellate proceedings, it was noted that although the assessee failed to disclose the capital gains, there was no attempt to conceal the sale of the property itself, which was duly mentioned in the return. The assessee maintained that he was unaware of the liability for capital gains, a stance he held consistently. The Tribunal observed that a plausible explanation could absolve the assessee from penalty liability, citing relevant case law to support this position.

The revenue relied on a recent judgment from the Calcutta High Court to support their argument for upholding the penalty. However, the Tribunal found that the circumstances surrounding the omission of capital gains by the assessee, coupled with his genuine belief in non-disclosure, did not warrant penalty imposition. Ultimately, after considering all aspects of the case, the Tribunal dismissed the appeal, concluding that there was no merit in the revenue's arguments.