1987 (3) TMI 160 - AT - Income Tax

Summary

Issues:
1. Appeal against confirmation of penalty under s. 271(1)(c) of the IT Act for the assessment year 1977-78.

Analysis:
1. The assessee claimed to have received gifts totaling Rs. 1,85,881 from various persons, some of whom were not assessed to tax. The ITO noted discrepancies in the gifts received, including some through drafts issued by a specific individual. The assessee, facing challenges in producing the donors, decided to surrender certain amounts totaling Rs. 23,300 to avoid prolonged litigation. The ITO accepted this surrender and assessed the income at Rs. 50,000, to which the assessee agreed.
2. The penalty proceedings under s. 271(1)(c) were initiated due to the variance between the returned income of Rs. 7,540 and the assessed income of Rs. 50,000. The ITO imposed a penalty of Rs. 13,970, citing specific items of gift totaling Rs. 10,700 that were not satisfactorily explained by the assessee.
3. The CIT(A) observed that the assessee's surrender of amounts and failure to produce certain donors hindered further investigation. The CIT(A) concluded that the assessee concealed income by offering false explanations and surrendering amounts without substantiation, especially considering the unverified identity of a key individual involved.
4. The assessee's counsel argued that the gifts received were customary on the occasion of marriage and were challenging to trace due to the lapse in time. The counsel emphasized the cooperation extended by the assessee, who agreed to be assessed at Rs. 50,000 to resolve the matter swiftly. The counsel contended that the penalty for concealment was unwarranted, given the circumstances and the lack of concrete evidence of concealment.
5. The Tribunal considered the facts, including the accepted gifts, the disputed items, and the surrender made by the assessee. It noted that specific items totaling Rs. 10,700 were identified as concealed income, while the rest was estimated for assessment purposes. The Tribunal found that penalty under s. 271(1)(c) should apply only to the specifically concealed amount of Rs. 10,700, considering the bona fide intentions behind the surrender and the lack of conclusive evidence of concealment in other aspects.
6. Consequently, the Tribunal partially allowed the appeal, directing the ITO to calculate and impose the minimum penalty under the law for the specifically concealed amount of Rs. 10,700, while ruling out penalty for the estimated surrender made by the assessee.