1988 (1) TMI 79 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Inspecting Assistant Commissioner to levy penalty under section 271(1)(c) after the deletion of section 274(2).
2. Establishment of concealment of income by the assessee.
3. Validity of the reference applications filed by the assessee and revenue.
4. Impact of subsequent judicial decisions on the initial judgment.

Detailed Analysis:

1. Jurisdiction of the Inspecting Assistant Commissioner:
The primary issue was whether the Inspecting Assistant Commissioner (IAC) had the jurisdiction to levy a penalty under section 271(1)(c) for the assessment year 1974-75 after the deletion of section 274(2) of the Income-tax Act, 1961, effective from 1-4-1976. The Tribunal initially held that the IAC had no jurisdiction to levy the penalty, following its previous decisions. However, this finding was later reversed by the Kerala High Court in ITR No. 121 of 1981, which held that the IAC continued to have jurisdiction even after the deletion of section 274(2). Consequently, the Tribunal was bound to conform to the High Court's judgment, reversing its earlier decision and upholding the jurisdiction of the IAC to levy the penalty.

2. Establishment of Concealment of Income:
The Tribunal examined the merits of the case for completeness. It found that there were clear erasures in the accounts, and the price of Rs. 1,43,049 was substituted for Rs. 83,619, indicating an inflation in the purchase price by Rs. 59,430. The assessee failed to provide a convincing explanation for this discrepancy. The Tribunal concluded that there was a clear concealment of income. Similarly, in the case of Rajeswari Textiles, the Tribunal found that the assessee could not account for the disposal of 11,737 meters of cloth, leading to a concealment of income amounting to Rs. 46,800.

3. Validity of the Reference Applications:
The revenue filed applications for reference, questioning the Tribunal's finding on the jurisdiction of the IAC. The Tribunal referred the matter to the High Court, which answered in favor of the revenue, confirming the IAC's jurisdiction. The assessee also filed reference applications challenging the Tribunal's finding of concealment. The Tribunal dismissed these applications, stating that the findings were based on facts and did not raise any substantial question of law. The High Court upheld the Tribunal's dismissal of the assessee's reference applications.

4. Impact of Subsequent Judicial Decisions:
The assessee argued that the Tribunal should follow the Full Bench decision in CIT v. P. I. Issac, which held that the IAC ceased to have jurisdiction after the deletion of section 274(2). However, the Tribunal noted that it was bound by the High Court's judgment in ITR No. 121 of 1981, which was specific to the case at hand. The Tribunal could not disregard this binding judgment in favor of a general principle laid down in a subsequent case. Additionally, the Tribunal found that the reference applications filed by the assessee were not nullities and were validly dismissed by the High Court.

Conclusion:
The Tribunal, in conformity with the High Court's judgment, held that the IAC had jurisdiction to levy the penalties. It upheld the penalties of Rs. 59,430 and Rs. 46,800 for the respective assessees, confirming the findings of concealment of income. The Tribunal's previous orders canceling the penalties were reversed, and the appeals of the assessees were dismissed.