1992 (9) TMI 128 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) for concealment of income.
2. Levy of penalty under Section 273(2)(a) for furnishing an untrue estimate of advance tax.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):

Background:
The appellant, a partnership firm, faced a penalty of Rs. 9,04,274 for the assessment year 1983-84 under Section 271(1)(c) of the Income Tax Act, 1961. The original return filed on 14th June 1983 claimed a deduction of Rs. 7,50,000 under Section 35CCA for donations to HACP Rural Development Association, Hyderabad. This claim was omitted in a revised return filed on 8th November 1983, declaring an income of Rs. 25,75,430.

Assessment Proceedings:
The Assessing Officer (AO) determined that the donation claim was bogus and initiated penalty proceedings for concealment of income. Additionally, penalty proceedings were initiated for three other additions:
- Rs. 48,543 for undervaluation of closing stock.
- Rs. 8,64,102 for commission payments to Shri B.L. Parikh.
- Rs. 50,000 for a loan from Shri A.K. Gupta.

Appeal to CIT(A):
The CIT(A) confirmed the penalty, imposing it at 200% of the tax sought to be evaded for the donation claim and 150% for the other three items. The appellant contended that the penalty should be deleted for the three items as the Tribunal had deleted these additions.

Tribunal's Findings:
- Donation Claim under Section 35CCA:
The Tribunal examined whether the claim was bona fide. The appellant argued that the donation was genuine and that the revised return was filed voluntarily upon discovering the donation had not reached the trust. The Tribunal noted that the cheques were not marked as 'account payee,' raising doubts about the appellant's intentions. The Tribunal also highlighted the lack of direct evidence and the preponderance of probabilities, concluding that the revised return was not filed voluntarily but under compulsion due to the IT Department's investigations. Consequently, the Tribunal upheld the penalty but reduced it to 100% of the tax sought to be evaded.

- Other Three Additions:
The Tribunal deleted the penalties for the three items (undervaluation of closing stock, commission payments, and loan) as the corresponding additions were deleted by the Tribunal in the quantum appeal.

2. Levy of Penalty under Section 273(2)(a):

Background:
The AO imposed a penalty for furnishing an untrue estimate of advance tax. The appellant argued that this penalty was consequential to the penalty under Section 271(1)(c).

Tribunal's Findings:
Given the deletion of penalties for three items under Section 271(1)(c) and the reduction of the penalty for the donation claim, the Tribunal directed consequential relief for the penalty under Section 273(2)(a) and recalculation based on the finally assessed tax.

Conclusion:
The Tribunal partly allowed the appeals, deleting the penalties for three items and reducing the penalty for the donation claim to 100% of the tax sought to be evaded. The penalty under Section 273(2)(a) was directed to be recalculated based on the revised tax assessment.