1992 (11) TMI 135 - AT - Income Tax

Summary

Issues Involved:
1. Penalty under section 271(1)(c) regarding cash credit of Rs. 10,000.
2. Penalty under section 271(1)(c) regarding notional addition of Rs. 1,100 as interest on cash credit.
3. Penalty under section 271(1)(c) regarding addition of Rs. 5,100 for household expenses.
4. Penalty under section 271(1)(c) regarding addition of Rs. 93,311 for silver bars.

Issue-wise Detailed Analysis:

1. Penalty under section 271(1)(c) regarding cash credit of Rs. 10,000:
The Income Tax Officer (ITO) imposed a penalty on the assessee for failing to prove the genuineness of a cash credit of Rs. 10,000 allegedly received from his wife, Smt. Laxmi Devi. The CIT(A) upheld the addition, and the Tribunal confirmed it, noting that "no material has been put forward on behalf of the assessee to show that the requisites of a genuine cash credit had been established." The learned counsel for the assessee argued that Smt. Laxmi Devi was a person of means, substantiated by the Tribunal's earlier acceptance of her acquisition of a silver bar. However, the Tribunal found that the assessee had not discharged the onus to prove the genuineness of the cash credit. Consequently, the penalty under section 271(1)(c) was confirmed.

2. Penalty under section 271(1)(c) regarding notional addition of Rs. 1,100 as interest on cash credit:
The ITO made a notional addition of Rs. 1,100 as interest on the cash credit of Rs. 10,000. The assessee's counsel argued that no interest had been paid or claimed as a deduction, and thus, the addition was unjustified. The Tribunal agreed, stating that "the amount of Rs. 1,100 represented a payment to 'self'," and canceled the penalty under section 271(1)(c) for this item.

3. Penalty under section 271(1)(c) regarding addition of Rs. 5,100 for household expenses:
The ITO made an addition of Rs. 5,100 for household expenses, which was purely on an estimated basis. The assessee's counsel argued that penalty under section 271(1)(c) did not arise as the addition was based on estimates and lacked cogent evidence. The Tribunal noted that the addition was made without specific evidence and referred only to the assessee's withdrawals, not his son's. Consequently, the penalty under section 271(1)(c) for this item was not sustained.

4. Penalty under section 271(1)(c) regarding addition of Rs. 93,311 for silver bars:
The ITO imposed a penalty of Rs. 2,00,000 under section 271(1)(c) for an addition of Rs. 93,311 related to silver bars found during a search operation. The CIT(A) canceled the penalty, noting that the Tribunal had accepted the assessee's explanation for some of the silver bars and that the explanation for the remaining bars was not proven false or unsubstantiated. The CIT(A) emphasized that "penalty cannot be levied for concealment merely on the basis of an assessment order" and that the onus lies on the Department to prove concealment and mens rea. The Tribunal upheld the CIT(A)'s decision, stating that the explanation provided by the assessee was not conclusively proven to be false or unsubstantiated, and thus, penalty under section 271(1)(c) was not attracted.

Conclusion:
The assessee's appeal was partly allowed, confirming the penalty under section 271(1)(c) for the cash credit of Rs. 10,000 but canceling the penalty for the notional interest addition of Rs. 1,100 and the household expenses addition of Rs. 5,100. The Revenue's appeal was rejected, upholding the CIT(A)'s decision to cancel the penalty for the addition of Rs. 93,311 related to silver bars.