1998 (5) TMI 46 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty u/s 271(1)(c) of the IT Act.
2. Assessment of unexplained income.
3. Assessee's claim of agreement with the Department for no penalty.
4. Quantification of concealed income.
5. Applicability of precedents and legal principles.

Summary:

1. Levy of penalty u/s 271(1)(c) of the IT Act:
The appeal is against the order of the CIT(A) regarding the levy of penalty u/s 271(1)(c) on the assessee, a hardware merchant, for concealing income of Rs. 2,98,800. The CIT(A) had cancelled the penalty, but the Department appealed to the Tribunal.

2. Assessment of unexplained income:
For the asst. yr. 1990-91, the assessee filed a return declaring an income of Rs. 30,370. The AO found discrepancies in the dates of payments to suppliers, indicating payments without sufficient cash balance in the business account. The AO added Rs. 2,98,800 as income from other sources and initiated penalty proceedings u/s 271(1)(c).

3. Assessee's claim of agreement with the Department for no penalty:
The assessee claimed that the lump sum addition was agreed upon to buy peace with the Department and under the assurance that no penalty would be levied. However, the AO rejected this explanation and levied a penalty of Rs. 1,60,000.

4. Quantification of concealed income:
The CIT(A) cancelled the penalty, stating that the Department had not come to a formal conclusion regarding concealment and had not quantified the concealed income. The Tribunal found that the AO had indeed quantified the unexplained payment as Rs. 2,98,800 and that the assessee had admitted this amount as income.

5. Applicability of precedents and legal principles:
The Tribunal referred to various precedents, including the Supreme Court's decision in Sir Shadilal Sugar Mills and the Kerala High Court's decisions in Union Engineering Co. and Haji P. Mohammed. It was held that the offer of income by the assessee, after the AO's enquiries, did not absolve the assessee from the liability to penalty u/s 271(1)(c).

Conclusion:
The Tribunal reversed the order of the CIT(A) and restored the penalty levied on the assessee. The appeal filed by the Revenue was allowed.