1982 (2) TMI 119 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Jurisdiction and competence of the IAC to levy the penalty.
3. Merits of the penalty levied under Section 271(1)(c) for concealment of income.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The appeal was filed late before the Tribunal, and the assessee explained that the initial appeal against the IAC's penalty order was mistakenly filed before the CIT(A). The CIT(A) dismissed the appeal due to lack of jurisdiction on 3rd Nov., 1979, after providing two hearings. Consequently, the appeal was filed before the Tribunal on 27th Nov., 1979. The Tribunal considered the explanation and condoned the delay on 19th Aug., 1981, allowing the appeal to be heard on merit.

2. Jurisdiction and Competence of the IAC to Levy the Penalty:

The assessee raised a contention regarding the jurisdiction and competence of the IAC to levy the penalty. However, during the hearing, the assessee's counsel admitted that this contention was against the assessee based on a judgment by the Punjab and Haryana High Court. Therefore, the Tribunal did not express any opinion on this issue and focused solely on the merits of the penalty.

3. Merits of the Penalty Levied under Section 271(1)(c) for Concealment of Income:

The core issue was the levy of a Rs. 19,681 penalty under Section 271(1)(c) for concealment of income. The assessment order for the year 1970-71 revealed that the assessee ran a nursing home, and a raid uncovered suppressed receipts. The ITO estimated additional income based on these suppressed receipts and allowed deductions for expenses, resulting in a net addition of Rs. 31,380. The AAC reduced this estimate, but the Tribunal restored the ITO's estimate, deeming it reasonable and based on rational grounds.

The IAC levied the penalty, considering the concealment but also acknowledging that the assessee, a professional, had relied on his accountant for accountancy. The assessee's counsel argued that the penalty should not apply as the income was estimated, citing a similar case for the assessment year 1971-72 where the penalty was dropped. The Departmental Representative countered by highlighting the suppression of receipts and referencing the Allahabad High Court decision in Addl. CIT vs. D.D. Lamba and Co.

The Tribunal, after reviewing the submissions and the case record, concluded that the penalty could not be sustained. It noted that the additions confirmed by the Tribunal were based on estimates, and the Revenue had resorted to estimates for both receipts and expenses. The Tribunal emphasized that penalties under Section 271(1)(c) should not be imposed based solely on estimated income, referencing the Punjab and Haryana High Court decision in Sunder Lal Mohinder Pal vs. CIT, which held that penalties are not exigible merely because the assessee's explanation was found false.

The Tribunal found that the facts of the instant case aligned with the precedent set by Sunder Lal Mohinder Pal, where penalties were not upheld on estimated additional profits. Furthermore, it was noted that for the assessment year 1971-72, under similar circumstances, the IAC had dropped the penalty proceedings.

Conclusion:

The Tribunal allowed the appeal and cancelled the penalty, following the Punjab and Haryana High Court's decision in Sunder Lal Mohinder Pal. The appeal was thus allowed, and the penalty was cancelled.