1981 (10) TMI 69 - AT - Income Tax

Summary

Issues:
1. Upholding of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 1973-74.
2. Allegations of concealment of income and inaccurate particulars of income.
3. Rejection of voluntary disclosure under the Voluntary Disclosure Scheme.
4. Imposition of penalty by the Income Tax Officer (ITO) and confirmation by the Appellate Authority.

Detailed Analysis:
1. The appellant, an individual with rental income and income from truck operations, challenged the penalty of Rs. 25,000 imposed by the ITO under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 1973-74. The penalty was upheld by the Appellate Authority. The main addition to the appellant's income was Rs. 25,000, related to cash shown in the statement of affairs submitted during assessment proceedings. The appellant explained the source of this amount, citing previous years' adjustments and voluntary disclosure. The ITO initially treated the addition as protective but later made it substantive, leading to the penalty imposition.

2. The appellant argued that there was no concealment of income, as the cash amount was disclosed in the statement of affairs. The appellant's representative contended that the rejection of the voluntary disclosure and subsequent penalty were unjustified, especially considering the absence of any finding of concealment in the assessment order. The appellant maintained that the penalty under section 271(1)(c) should not apply due to the lack of contumacious conduct.

3. The revenue opposed the appellant's arguments, emphasizing the ITO's penalty imposition and the statutory obligation for the appellant to prove no gross neglect in the addition of Rs. 25,000. However, upon reviewing the evidence and submissions, the Tribunal accepted the appellant's contention. The Tribunal found that the rejection of the voluntary disclosure was based on technical grounds, and the appellant's conduct did not amount to concealment of income. The Tribunal highlighted the appellant's history of tax assessments, indicating discrepancies between declared and assessed income, supporting the appellant's explanation for the cash amount.

4. The Tribunal concluded that the penalty was unjustified on multiple grounds. Firstly, the charge of concealing income lacked merit due to the absence of a recorded finding during assessment proceedings. Secondly, the initiation of penalty proceedings without satisfaction by the ITO was deemed improper. Lastly, the Explanation to section 271(1)(c) did not apply as the penalty was solely based on the addition accepted by the appellant. Consequently, the Tribunal allowed the appeal and canceled the penalty, citing various reasons for the decision.