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1994 (3) TMI 148 - AT - Income Tax

Issues Involved:
1. Applicability of statutory provisions for determining the levy and quantification of penalty under section 271(1)(c) of the Income-tax Act.
2. Exigibility of penalty under section 271(1)(c) based on the facts of the case.

Issue-wise Detailed Analysis:

1. Applicability of Statutory Provisions for Determining the Levy and Quantification of Penalty under Section 271(1)(c) of the Income-tax Act:

The principal question was to determine which statutory provision is applicable for deciding the levy and quantification of penalty under section 271(1)(c) of the Income-tax Act. The learned counsel for the assessee argued that the matter should be decided according to the Hon'ble Supreme Court's decision in CIT v. Onkar Saran & Sons [1992] 195 ITR 1. Conversely, the learned Departmental Representative contended that the issue should be determined based on the decision in Varkey Chacko v. CIT [1993] 203 ITR 885.

The Tribunal concluded that the matter is fully covered by the Supreme Court's decision in Onkar Saran & Sons, which states that penalty has to be computed as per the law existing on the date of filing the first return. The Tribunal noted the original return was filed on 26th July 1961. Therefore, the penalty, if any, is required to be computed according to the statutory provisions of section 271(1)(c) of the Income-tax Act as they existed on that date.

The Tribunal further examined the relevant provisions before and after the amendment w.e.f. 1st April 1964, highlighting the differences in the penalties imposed under section 28 of the 1922 Act and section 271(1)(c) of the 1961 Act.

2. Exigibility of Penalty under Section 271(1)(c) Based on the Facts of the Case:

The Tribunal then examined whether, on the facts, the penalty is exigible as per the relevant provisions applicable in this case. The Assessing Officer had added Rs. 1 lakh as income from undisclosed sources due to the assessee's failure to explain the source of repayment of a loan to M/s. Globe Associates (P.) Ltd. The Tribunal noted that the penalty was imposed because the assessee could not discharge the onus under section 68 of the Income-tax Act. However, the Tribunal emphasized that penalty proceedings are penal in nature and the burden is on the department to prove that a particular amount is a revenue receipt, as established in CIT v. Anwar Ali [1970] 76 ITR 696.

The Tribunal observed that the explanation tendered by the assessee was found to be false, but this alone does not necessarily mean that the disputed amount constituted the assessee's taxable income. The revenue failed to establish that the disputed amount of Rs. 1 lakh was the taxable income of the assessee, consciously concealed. Therefore, the penalty under section 271(1)(c) could not be recorded based on the available material, and the penalty was not exigible.

Regarding the addition of Rs. 1,92,000 for the unexplained cost of construction, the Tribunal noted that this was based on a pure estimate. The assessee had furnished a fresh certificate from M/s. Sathe & Kothari, estimating the cost of construction at Rs. 16,96,546 against Rs. 16,48,909 disclosed in the books. The lower authorities did not comment on this second certificate, and the addition was sustained only due to the difference in the two estimates. The Tribunal concluded that the addition sustained purely on estimate could not be treated as concealed income following the decision in Anwar Ali. Therefore, the penalty for this addition was also not exigible.

Conclusion:

The Tribunal held that the penalty under section 271(1)(c) was not exigible for both the items of addition. Consequently, the levy of penalty was canceled, the assessee's appeal was allowed, and the Revenue's appeal was dismissed.

 

 

 

 

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