1989 (2) TMI 141 - AT - Income Tax

Account Books Assessing Officer Assessment Proceedings Assessment Year Unexplained Cash Credits

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) for concealment of income.
2. Validity of additions made to the assessee's income based on seized materials.
3. Burden of proof regarding the ownership of seized books and materials.
4. Impact of not filing an appeal against the quantum assessment on penalty proceedings.
5. Consideration of reliefs under sections 80HH and 80-I in computing the tax sought to be avoided.
6. Inclusion of additions made under section 263 in penalty calculations.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The assessee, a private limited company running a flour mill, was penalized under section 271(1)(c) for concealing income. The penalty was based on additions made to the assessee's income from unexplained cash credits, investments, and the value of 'murgidana' found during a search operation. The Income-tax Department conducted a search at the business premises and residences of the company's director and a shareholder, resulting in the discovery of certain books and materials. The penalty was initially set at Rs. 17,07,540 but was later reduced to Rs. 8,53,770 by the CIT(A).

2. Validity of Additions to Income:
The additions included Rs. 7,67,382 for unexplained investments, Rs. 4,91,491 for unexplained income, and Rs. 12,000 for the value of 'murgidana'. The assessee argued that these additions were unjustified as the seized books and materials did not belong to the company. The IAC (Assessments) made these additions based on the seized books found at the residence of a shareholder and the 'murgidana' found at the director's residence. The assessee contended that there was no evidence linking these items to the company.

3. Burden of Proof:
The Tribunal emphasized that the burden of proof was on the revenue to establish that the seized books and materials belonged to the assessee. The Tribunal noted that the books were found in the compound of the shareholder's residence, not in the company's possession. The shareholder, Hari Bhushan, denied any knowledge of the books' ownership. The Tribunal concluded that there was no positive evidence linking the books to the assessee, and mere suspicion was insufficient for making such additions.

4. Impact of Not Filing an Appeal:
The assessee did not file an appeal against the quantum assessment, which the revenue argued indicated acceptance of the additions. However, the Tribunal held that not filing an appeal did not amount to an admission of concealment. The Tribunal emphasized that an admission must be specific and mere failure to take remedial action could not be construed as an admission of concealment.

5. Consideration of Reliefs under Sections 80HH and 80-I:
The assessee argued that reliefs under sections 80HH and 80-I should be considered in computing the tax sought to be avoided. The Tribunal noted that relief under section 80-I had been granted in a subsequent rectification order, and therefore, it should be considered in the penalty calculations. However, no relief under section 80HH was granted in the quantum assessment, and there was no evidence to support the claim for such relief.

6. Inclusion of Additions under Section 263:
The Tribunal addressed the issue of whether penalty could be levied based on additions made under section 263 by the CIT. The Tribunal referred to judicial precedents and held that the IAC (Assessments) could not levy penalty based on additions made by appellate or revisional authorities. Therefore, the addition of Rs. 84,320 made under section 263 could not be included in the penalty calculations.

Conclusion:
The Tribunal concluded that the revenue failed to discharge its burden of proving that the seized books and materials belonged to the assessee. The Tribunal found that the assessee's explanation regarding the ownership of the seized items was substantiated by the circumstances of the case. The Tribunal also held that the assessee's failure to file an appeal did not amount to an admission of concealment. Consequently, the Tribunal allowed the assessee's appeal and canceled the penalty.