1976 (1) TMI 43 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) for concealment of income.
2. Validity of penalty imposition when the managing partner responsible for concealment has passed away.
3. Voluntariness and bona fides of the disclosure of concealed income.
4. Consistency in penalty imposition across different assessment years.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The primary issue revolves around the levy of a penalty of Rs. 50,000 under Section 271(1)(c) for the assessment year 1970-71. The assessee, a firm involved in jewellery and wholesale liquor business, had its income reassessed, leading to the discovery of concealed income. The Income Tax Officer (ITO) added an amount of Rs. 52,093 instead of the declared Rs. 43,607, leading to the imposition of the penalty by the Inspecting Assistant Commissioner (IAC).

2. Validity of Penalty Imposition Post Demise of Managing Partner:
The business was originally managed by Mr. P.T. Antony, who passed away after the accounting year ended on 31st March 1970. The return was filed posthumously by another partner, Mr. P.A. Jose. The assessee contended that any concealment was attributable to the deceased managing partner, and the new partners, being young and inexperienced, should not be held responsible. This argument was rejected, referencing the case of G. Krishna Swamy Naidu vs. CIT, which stated that the consciousness of concealment is attributed to the entity (firm or HUF) and not just the individual managing partner.

3. Voluntariness and Bona Fides of the Disclosure:
The assessee argued that the disclosure of the concealed income was voluntary and should be considered a bona fide omission. The ITO had reopened the assessments based on information provided by the assessee during the 1972-73 assessment proceedings. The IAC, however, held that the disclosure was not voluntary but a result of investigation. The Tribunal disagreed, highlighting that the ITO's order sheet indicated no independent investigation and that the disclosure was initiated by the assessee. This voluntary disclosure was deemed to negate the basis for the penalty.

4. Consistency in Penalty Imposition Across Different Assessment Years:
The assessee pointed out that penalties for the assessment years 1969-70 and 1971-72 were waived under Section 271(4A) by the Commissioner of Income Tax (CIT), arguing that the circumstances for 1970-71 were identical. The Tribunal noted the absence of recorded reasons for rejecting the waiver for 1970-71 and found no significant difference in circumstances, especially since the IAC did not impose a penalty on the additional 456 grams of gold assessed that year. The Tribunal concluded that the penalty should have been waived for 1970-71 as well, maintaining consistency with the other years.

Conclusion:
The Tribunal held that the penalty under Section 271(1)(c) was not leviable. The assessment was based on voluntary disclosure by the assessee, and the circumstances were similar to other years where penalties were waived. The appeal was allowed, and the penalty was set aside.