1985 (5) TMI 100 - AT - Income Tax

Assessment Proceedings, Assessment Year, Jurisdiction To Impose Penalty, Original Assessment, Penalty For Concealment, Penalty Proceedings, Reassessment Proceedings, Reference To IAC

Summary

Issues:
1. Concealment of capital gain in the original return.
2. Jurisdiction of the Income Tax Officer (ITO) to impose penalty under section 271(1)(c).
3. Correlation of penalty proceedings with the return filed during original assessment proceedings.
4. Quantum of penalty linked to the amount of income concealed.

Detailed Analysis:
1. The case involved an appeal by an individual assessee, an eye specialist, for the assessment year 1969-70, where capital gain from the sale of a property was not disclosed in the original return. The ITO initiated penalty proceedings under section 271(1)(c) after reassessment, as the capital gain was not disclosed even in the return filed in response to the notice under section 147(a)/148 of the Income-tax Act, 1961.

2. The Appellate Assistant Commissioner (AAC) upheld the penalty, considering the concealment of capital gain in the original return as a willful default. The main contention before the Tribunal was the jurisdiction of the ITO to impose the penalty exceeding Rs. 1,000 without referring the matter to the Inspecting Assistant Commissioner (IAC) as per earlier provisions.

3. The Tribunal considered the law prevailing at the time of the original return filing to determine the jurisdiction of the ITO to impose the penalty. It was argued that penalty proceedings initiated during reassessment should be correlated with the return filed during the original assessment proceedings. The Tribunal discussed various scenarios of concealment and reassessment to establish the correlation between the penalty and the original return.

4. The Tribunal concluded that the ITO had jurisdiction to impose the penalty, as the relevant provisions requiring reference to the IAC were omitted after1-4-1976. The penalty amount was correctly linked to the concealed income for the period between1-4-1968and31-3-1976. The Tribunal dismissed the appeal, emphasizing the correlation between the penalty proceedings and the original return filed by the assessee.

5. The judgment highlighted the importance of aligning penalty proceedings with the concealment in the original return, even if detected during reassessment. It underscored the principle that the substantive penal provisions applicable are those prevalent at the time of the original return filing, ensuring consistency in penalty imposition for income concealment.