1976 (1) TMI 44 - AT - Income Tax

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) for the assessment years 1962-63 to 1967-68 and 1969-70.
2. Limitation period for passing penalty orders.
3. Jurisdiction of the Inspecting Assistant Commissioner (IAC) to levy penalties.
4. Merits of the case regarding the alleged concealment of income.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The case involves seven appeals by the assessee against the imposition of penalties under Section 271(1)(c) for the assessment years 1962-63 to 1967-68 and 1969-70. The penalties were levied due to the assessee's failure to account for the sale proceeds of sample tea, inflated expenses in various accounts, and undisclosed investments in fixed deposits and immovable properties.

2. Limitation Period for Passing Penalty Orders:
The assessee argued that the penalty orders were barred by limitation as they were passed more than two years after the assessment orders. The Tribunal held that the two-year rule is procedural and not substantive. Therefore, the extended time limit for passing penalty orders, as per the Taxation Laws (Amendment) Act, 1970, applies to the pending proceedings. The penalty orders were thus held to be within the time limit.

3. Jurisdiction of the IAC to Levy Penalties:
The assessee contended that the IAC had no jurisdiction to levy penalties as the concealed income for each year was less than Rs. 25,000. The Tribunal ruled that jurisdiction matters are substantive law and are governed by the law as it stood when the returns were filed. Since the minimum penalty imposable exceeded Rs. 1,000, the IAC had jurisdiction in these cases.

4. Merits of the Case Regarding Concealment of Income:
The Tribunal found ample evidence of concealment, including inflated expenses and undisclosed investments. The assessee had admitted to discrepancies in their accounts and the concealment of income, which surfaced as investments in banks and properties. The penalties for the assessment years 1962-63 to 1967-68 were upheld as the minimum penalties imposable.

For the assessment year 1969-70, the Tribunal found that the estimated cash balance of Rs. 33,000 had no basis and should be excluded from the concealed income. After excluding this amount, the unexplained investment was only Rs. 1,309. Considering the smallness of the amount, the penalty for the assessment year 1969-70 was cancelled.

Conclusion:
The appeals for the assessment years 1962-63 to 1967-68 were dismissed, and the penalties were upheld. The appeal for the assessment year 1969-70 was allowed, and the penalty was cancelled.