1999 (2) TMI 101 - AT - Income Tax

Summary

Issues:
1. Validity of penalty under section 271(1)(c) of the IT Act, 1961 for assessment year 1991-92.

Detailed Analysis:
The appeal was filed against the order of the CIT(A) confirming the penalty levied under section 271(1)(c) of the IT Act, 1961 for the assessment year 1991-92. The appellant company, engaged in the sale and purchase of gold and diamond ornaments, voluntarily disclosed an additional income of Rs. 6 lakhs during a survey conducted under section 133A of the Act. The appellant revised its return accordingly, and the assessing officer accepted the additional income, assessing the total income at Rs. 5,60,630 for the relevant year. The appellant contested the penalty proceedings, arguing that the disclosure was made during the survey and was conditional upon immunity from penal consequences. The AO rejected the contention and imposed a penalty of Rs. 3,10,500 under section 271(1)(c) of the Act.

The first issue raised by the appellant was the timing of the disclosure and the conditions attached to it. The appellant contended that the disclosure was made during the survey and was based on an oral agreement that no penalty would be levied. The appellant argued that since the survey was conducted in January 1992, the relevant assessment year should be 1992-93. The appellant further relied on case law to support the argument that conditional disclosures cannot be the sole basis for imposing penalties.

The second issue revolved around the adequacy of the material considered by the AO in imposing the penalty. The appellant argued that the AO did not provide any objective material justifying the imposition of the penalty, relying solely on the appellant's admission during the survey. The appellant contended that the penalty was imposed selectively, accepting part of the appellant's offer while disregarding the condition attached to it regarding immunity from penalties.

In the final analysis, the Tribunal found in favor of the appellant, concluding that the penalty was not validly imposed by the lower authorities. The Tribunal noted that the disclosure was made during the survey, the material detected pertained to the subsequent assessment year, and the penalty was imposed without sufficient objective material. Consequently, the Tribunal deleted the penalty and allowed the appeal of the assessee, highlighting the importance of considering all relevant factors before imposing penalties under the IT Act, 1961.