1995 (2) TMI 110 - AT - Income Tax

Assessed Income, Assessing Officer, Original Assessment, Penal Interest, Penalty For Concealment, Revised Returns

Summary

Issues Involved:
1. Penalty under Section 271(1)(c) for assessment years 1983-84 to 1987-88.
2. Concealment of income and furnishing of inaccurate particulars.
3. Bona fide mistake or omission in original returns.
4. Calculation and reduction of penalty.

Issue-wise Detailed Analysis:

1. Penalty under Section 271(1)(c) for assessment years 1983-84 to 1987-88:
The common issue in these appeals relates to the imposition of penalty under Section 271(1)(c) of the Income Tax Act. The assessee, a registered firm, had failed to fulfill its loan repayment commitments to Citi Bank, leading to a suit and a subsequent Consent Decree. Despite this, the assessee did not reflect the waiver of Rs. 10,22,770 in its books for the assessment year 1983-84 and continued to claim interest on the entire outstanding amount. The Assessing Officer initiated penalty proceedings and imposed penalties for the assessment years 1983-84 to 1987-88, which were later confirmed but reduced by the CIT (Appeals).

2. Concealment of income and furnishing of inaccurate particulars:
The Tribunal noted that the assessee had filed original returns claiming interest on the entire outstanding amount of Rs. 52,07,873, despite the Consent Decree reducing the liability to Rs. 42,45,277. The assessee did not disclose the settlement with Citi Bank in its books or statements filed with the returns, nor provided the decree to the Assessing Officer during the assessment proceedings for the years 1983-84 to 1985-86. The Tribunal found that the assessee had made wrong claims in the original returns and had not disclosed the true income, thus attracting penalty under Section 271(1)(c).

3. Bona fide mistake or omission in original returns:
The assessee argued that the omission was due to a misunderstanding that the compromise would be finalized only upon full liquidation of the loan. However, the Tribunal found this explanation unconvincing, noting that the decree did not provide for the revival of the waived amount under any circumstances. The Tribunal held that the omission and wrong claims were not bona fide mistakes, thus justifying the imposition of penalty.

4. Calculation and reduction of penalty:
The Assessing Officer had imposed penalties at 200% of the difference between the returned income and the finally assessed income, which the CIT (Appeals) reduced to 150%. The Tribunal further reduced the penalty to 100%, considering the assessee's voluntary disclosure and cooperation during the assessment proceedings for the years 1986-87 and 1987-88. The Tribunal directed the Assessing Officer to recalculate the penalty at 100% for the relevant assessment years, excluding certain amounts where the penalty was not justified.

Conclusion:
The Tribunal upheld the penalties for concealment of income and furnishing inaccurate particulars for the assessment years 1983-84 to 1987-88, but reduced the penalty to 100%, considering the assessee's voluntary disclosure and cooperation. The assessee was advised to approach administrative authorities for waiver of the penalty if all conditions were satisfied. The appeals were partly allowed.