1983 (4) TMI 97 - AT - Income Tax

Summary

Issues Involved:
1. Assessment of income for the years 1976-77, 1977-78, and 1978-79.
2. Penalty proceedings under Section 271(1)(c) for alleged concealment of income.
3. Determination of unaccounted investments in the yarn business.

Detailed Analysis:

1. Assessment of Income:
The assessee, an HUF with Shri Madan Gopal Bansal as the Karta, filed returns for the assessment years 1976-77, 1977-78, and 1978-79, declaring incomes of Rs. 10,665, Rs. 11,240, and Rs. 10,220, respectively. However, during a search on 24/25th Nov., 1978, significant discrepancies were found including unaccounted cash, jewellery, and household items, as well as books of account indicating substantial sales and interest income from a yarn business.

For the assessment year 1976-77, the income was revised to Rs. 1,10,700, including undisclosed income from the yarn business. For 1977-78, the total income was determined at Rs. 1,24,579, and for 1978-79, it was Rs. 2,00,160, with significant additions for undisclosed income and unaccounted investments.

2. Penalty Proceedings Under Section 271(1)(c):
Penalties were initiated for all three years for concealment of income. The IAC levied penalties of Rs. 70,000, Rs. 70,000, and Rs. 1,21,000 for the respective years. The assessee argued that the income was estimated and agreed upon to avoid litigation, and no penalties should be levied. The CIT(A) upheld the penalties but reduced the amounts to Rs. 22,470, Rs. 90,000, and Rs. 1,00,000 for the respective years, excluding penalties on unaccounted investments.

3. Determination of Unaccounted Investments:
The IAC estimated unaccounted investments based on the sales recorded in the seized books and applied a ratio to determine the required investment. For 1976-77, the IAC estimated Rs. 77,540 as unaccounted investment, which the CIT(A) and the Tribunal found to be purely estimated and not justifiable for penalty. For 1977-78, the unaccounted investment was estimated at Rs. 25,000, and for 1978-79, it was Rs. 92,000. The Tribunal agreed with the CIT(A) that these figures were also purely estimated and did not warrant penalties.

Tribunal's Findings:
1. Assessment Year 1976-77:
- Penalty was upheld on the business income of Rs. 1,470 but not on the estimated interest income of Rs. 21,000.
- The unaccounted investment of Rs. 77,540 was found to be an estimated figure and not subject to penalty.

2. Assessment Year 1977-78:
- Penalty was upheld on the business income of Rs. 26,264 (profit on actual sales) and interest income of Rs. 1,651.
- The estimated sales and interest income beyond these figures were not subject to penalty.
- The unaccounted investment of Rs. 25,000 was found to be an estimated figure and not subject to penalty.

3. Assessment Year 1978-79:
- Penalty was upheld on the business income of Rs. 34,073 (profit on actual sales) and interest income of Rs. 45,520.
- The estimated sales and interest income beyond these figures were not subject to penalty.
- The unaccounted investment of Rs. 92,000 was found to be an estimated figure and not subject to penalty.

Conclusion:
The Tribunal partly allowed the appeals of the assessee for the years 1976-77, 1977-78, and 1978-79 by reducing the penalties to the amounts directly related to the actual income from the yarn business and interest as recorded in the seized books. The Tribunal dismissed the appeals of the Revenue, upholding the CIT(A)'s decision to exclude penalties on the estimated unaccounted investments.