2003 (10) TMI 259 - AT - Income Tax

Summary

Issues Involved:

1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Concealment of income by the assessee.
3. Reassessment proceedings for the assessment years 1974-75 to 1978-79.
4. Validity of penalty orders based on statutory provisions.
5. Material evidence for assessment and penalty.

Issue-wise Detailed Analysis:

1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961:

The appeals by the assessee contest the consolidated order of the CIT(A) upholding the penalty under Section 271(1)(c) for the assessment years 1974-75 to 1978-79. The CIT(A) confirmed the penalties on the grounds that the assessee had concealed particulars of income. The penalties imposed for various years are as follows: 1974-75 (Rs. 34,350), 1975-76 (Rs. 26,990), 1976-77 (Rs. 29,200), 1977-78 (Rs. 16,700), and 1978-79 (Rs. 62,282).

2. Concealment of income by the assessee:

The assessee carried on Arhat business in foodgrain, showing commission earned at 1% on sales. The AO later concluded that the assessee had underreported income, as other commission agents in Jagraon showed a 1.5% commission. The assessee had also agreed to a 1.5% commission before the Settlement Commission for subsequent years. The Tribunal, in earlier orders, confirmed reassessments, noting no dispute regarding sales figures collected from the Sales-tax Department.

3. Reassessment proceedings for the assessment years 1974-75 to 1978-79:

Reassessments were initiated due to the assessee's failure to disclose proper income. In reassessment proceedings, the assessee maintained a 1% commission rate but did not produce books of accounts. The AO rejected this claim, and additions were made based on a 1.5% commission rate. The first appellate authority confirmed these additions. For the assessment year 1977-78, the Tribunal restored the case to the CIT(A) for fresh adjudication, who upheld the original assessment order.

4. Validity of penalty orders based on statutory provisions:

The AO imposed penalties based on the statutory provisions effective from 1st April 1964, which were no longer applicable for assessment years 1976-77 onwards. The AO failed to apply the correct law and did not record findings regarding the Explanation introduced to Section 271(1)(c) effective from 1st April 1976. The CIT(A) also failed to notice the change in statutory provisions, confirming penalties in a routine manner. The penalty orders for assessment years 1976-77, 1977-78, and 1978-79 were deemed bad in law and canceled.

5. Material evidence for assessment and penalty:

The AO based the reassessment and penalties on the fact that other commission agents showed a 1.5% commission and the assessee's admission before the Settlement Commission for subsequent years. However, the Tribunal noted that these circumstances alone were insufficient to justify the levy of penalty. The Tribunal emphasized that the AO must collect evidence specific to the assessment year in question. The Tribunal cited several cases, including CIT vs. Pioneer Engineering Syndicate and CIT vs. Moti Lal & Co., highlighting that mere presumption or past history is not enough to justify penalty without material evidence for the specific year.

Conclusion:

The Tribunal concluded that the AO and CIT(A) failed to apply their minds to the facts and circumstances of the case. The penalties for assessment years 1976-77, 1977-78, and 1978-79 were canceled due to incorrect application of statutory provisions. For assessment years 1974-75 and 1975-76, the Tribunal found no material evidence of fraud, gross, or willful neglect by the assessee. The Tribunal held that no case of concealment was established and canceled the penalties for all five years. All five appeals filed by the assessee were allowed.