1993 (12) TMI 92 - AT - Income Tax

Summary

Issues:
1. Penalty imposed under section 271(1)(c) of the Income-tax Act for alleged concealment of income by the assessee.
2. Dispute regarding the payment of a fine of Rs. 12,500 by the assessee-firm without reflecting it in the books of account.
3. Claim by the assessee that the fine amount was contributed by partners out of their own resources and not by the partnership firm.

Detailed Analysis:
Issue 1:
The appeal was against the penalty of Rs. 5,870 imposed under section 271(1)(c) of the Income-tax Act for the assessment year 1987-88. The penalty was upheld by the DCIT (Appeals) and challenged before the Appellate Tribunal. The Assessing Officer initiated reassessment proceedings under section 148 based on information about the payment of a fine of Rs. 12,500 not reflected in the books of account. The penalty was imposed for allegedly concealing income in the original return.

Issue 2:
The Assessing Officer rejected the claim of the assessee that the fine amount was contributed by partners out of their own resources and not by the partnership firm. The Assessing Officer treated the amount as invested by the assessee from undisclosed sources. The DCIT (Appeals) confirmed the penalty, considering the claim as an 'after-thought' and holding the assessee to have concealed income. The Appellate Tribunal examined the material on record to justify the investment of Rs. 12,500 from undisclosed sources and found no legal or factual justification for rejecting the claim.

Issue 3:
The assessee contended that the amount in dispute was contributed by partners and not by the partnership firm, as it was not a permissible deduction under the Act. The Tribunal observed that a partner, as an agent, is authorized to make payments on behalf of the partnership, and there was no legal bar against such payment. The Tribunal found no material to justify the conclusion that the claim was an 'after-thought' and held that the Assessing Officer's rejection of the claim lacked basis or material. The Tribunal concluded that the assessee acted bona fide and canceled the penalty, holding that no case for levying penalty was established by the revenue.