1989 (11) TMI 87 - AT - Income Tax

Summary

Issues Involved:

1. Imposition of penalty under Section 271(1)(c) of the IT Act, 1961 for concealment of income.
2. Applicability of the Amnesty Scheme.
3. Evaluation of the appellant's explanation and conduct.
4. Consideration of judicial precedents and case law.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the IT Act, 1961 for Concealment of Income:

The appellant contested the imposition of penalty by the Income Tax Officer (ITO) and its confirmation by the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that the penalty was uncalled for. The appellant maintained that he did not fail to furnish particulars of income or conceal income. The penalty was claimed to be based on a misinterpretation of the facts on record. The ITO initiated penalty proceedings for concealment of income after a survey operation revealed discrepancies in the appellant's assets, including stock, cash in hand, security deposit, and investment in house construction.

2. Applicability of the Amnesty Scheme:

The appellant had disclosed an investment of Rs. 2,88,000 for taxation under the Amnesty Scheme on 30th September 1986, spreading it over the assessment years from 1978-79 to 1986-87. The ITO did not accept this disclosure under the Amnesty Scheme, arguing that the appellant came forward only after the survey operation on 29th September 1986. The appellant argued that the Amnesty Scheme was operational until 30th September 1986, and the revised returns were filed before receiving any notice from the department. The CIT(A) questioned whether the appellant was entitled to the benefit of the Amnesty Scheme, considering the timing of the survey operation and the subsequent filing of returns.

3. Evaluation of the Appellant's Explanation and Conduct:

The appellant's explanation was that the income admitted was spread over nine years without concrete evidence linking the income to each specific year. The appellant's intention was to reduce the tax burden by spreading the income. The CIT(A) considered this spread over to be at the appellant's instance and noted that if no spread over had been made, the entire income would have been assessed in the assessment year 1987-88 under the deeming provisions of the IT Act. The CIT(A) also noted that the discrepancy in the investment of Rs. 2,88,000 would not have gone unnoticed by the appellant, implying a deliberate attempt to understate income in the original returns.

4. Consideration of Judicial Precedents and Case Law:

The appellant's counsel cited several judgments to support the argument that penalty should not be imposed merely based on the admission of income. These included:
- Punjab and Haryana High Court in KRISHAN LAL SHIVCHAND RAI vs. CIT, which held that surrendering income does not necessarily imply admission of concealment.
- Orissa High Court in CIT vs. SMT VEERAWALI, which stated that penalty is not mandatory even if the statute provides for it.
- Punjab and Haryana High Court in GUMANI RAM SIRI RAM vs. CIT, which held that penalty could not be imposed merely because income was surrendered.
- Madras High Court in ADDL. CIT vs. E. BHOOPATHY, which emphasized that penalty proceedings require material evidence of income earned in each year.

The departmental representative argued that the appellant's admission of income was sufficient to justify the penalty and cited Supreme Court judgments, including GUJARAT TRAVANCORE AGENCY vs. CIT and CIT vs. MUSSADILAL RAMBHAROSE, to support the imposition of penalty without the necessity to prove mens rea.

Conclusion:

After examining the penalty orders, the CIT(A)'s order, and considering the arguments and case law, the Tribunal concluded that the admission of income does not automatically warrant a penalty. The appellant's admission should be considered fairly and judiciously. The penalties levied by the ITO and confirmed by the CIT(A) were deemed inappropriate and were subsequently cancelled. The appeals were allowed, and the penalties were cancelled.