1983 (4) TMI 93 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty under Section 271(1)(c) for the assessment year 1975-76.
2. Deletion of penalty under Section 271(1)(c) for the assessment year 1976-77.
3. Penalty imposition on HUF for the assessment years 1975-76 and 1976-77.

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c) for the Assessment Year 1975-76:

The Revenue objected to the CIT (A)'s order deleting a penalty of Rs. 30,000 levied against the assessee, an individual. The residential and business premises of the assessee were searched, leading to the seizure of incriminating documents and books of accounts. Two specific investments were detected: the construction of a temple at Hastinapur and loans worth Rs. 1,40,000 represented by pronotes. The assessment culminated in an addition of Rs. 28,500 as undisclosed income, which was 50% of Rs. 57,000 held to be assessable in the hands of the individual and HUF equally. Penalty proceedings under Section 271(1)(c) were initiated, and a penalty of Rs. 30,000 was imposed. The CIT (A) canceled the penalty, leading to the Revenue's appeal.

The Revenue argued that the incriminating documents justified the penalty, referencing several cases where penalties were upheld under similar circumstances. The assessee, however, contended that the additions were accepted to buy peace and avoid litigation, and there was no concealment of income. The assessee also provided explanations for the investments, stating that the temple construction was funded by donations and the pronotes were not actual loans.

The Tribunal found that the construction of the temple was funded by donations and collections from a cash box, and the pronotes were not indicative of actual loans. The Tribunal concluded that there was no evidence of income concealment or unexplained investments by the assessee. The penalty under Section 271(1)(c) was deemed not exigible, and the CIT (A)'s order canceling the penalty was upheld.

2. Deletion of Penalty under Section 271(1)(c) for the Assessment Year 1976-77:

For the assessment year 1976-77, the AO initiated penalty proceedings based on an addition of Rs. 5,400, which was later deleted and substituted by another addition. The CIT (A) held that since the basis for the penalty did not exist at the time of levy, the penalty could not be sustained. The Tribunal agreed, referencing the Calcutta High Court's decision in CIT, West Bengal vs. C. K. Vaha & Bros., which held that penalty imposition on a different sum than originally cited is null and void. The CIT (A)'s order deleting the penalty was upheld.

3. Penalty Imposition on HUF for the Assessment Years 1975-76 and 1976-77:

The penalties for these years were imposed on the same basis as in the individual case and were deleted by the CIT (A) based on his findings in the individual case. The Tribunal upheld the CIT (A)'s orders, reiterating the reasons discussed in the individual's case.

Conclusion:

The Tribunal dismissed the Revenue's appeals, sustaining the CIT (A)'s orders canceling the penalties for both the individual and HUF for the assessment years 1975-76 and 1976-77. The Tribunal found no evidence of income concealment or unexplained investments, and the penalties under Section 271(1)(c) were deemed not exigible.