1989 (8) TMI 116 - AT - Income Tax

Applied To Assessment Year Bona Fide Levy Of Penalty Penalty Proceedings Settlement Proceedings Valuation Report

Issues Involved:
1. Levy of penalty under section 271(1)(c) for assessment years 1976-77, 1977-78, 1978-79, and 1979-80.
2. Validity of the settlement agreement and whether it precluded the imposition of penalties.
3. Whether there was concealment of income by the assessee.
4. Bona fides and substantiation of the assessee's explanations regarding the assets found during the search.
5. Impact of the assessee's surrender of income on the levy of penalties.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c)
The appeals by the assessee were against the levy of penalty under section 271(1)(c) for the assessment years 1976-77, 1977-78, 1978-79, and 1979-80. The Income-tax Officer (ITO) had levied penalties based on additional income of Rs. 30,000 offered by the assessee in each of the years, which was confirmed by the Commissioner of Income-tax (Appeals) [CIT(A)].

2. Validity of the Settlement Agreement
The assessee contended that the settlement agreement with the Commissioner included an assurance that no penalties would be levied. However, the Tribunal found no documentary evidence to support this claim. The Commissioner had rejected the petition under section 273A(4) for waiver of penalties, stating no such assurance was given. The Tribunal concluded that no legally binding assurance was made, and thus, the first contention of the assessee failed.

3. Concealment of Income
The Tribunal examined whether the assessee had concealed income. The ITO's orders were based on tentative conclusions from investigations under section 132(5). The assessments were completed based on the settlement, without further investigation into the assessee's explanations. The Tribunal noted that the ITO did not record findings that the explanations were false or not bona fide.

4. Bona Fides and Substantiation of Explanations
Cash:
The total cash found was Rs. 68,766, of which Rs. 38,766.45 was accepted as business cash. The remaining Rs. 30,000 was claimed to belong to the assessee's mother, supported by her statement and a will. The Tribunal found the explanation bona fide and substantiated by the material on record.

Jewellery:
The jewellery found was 1030 gms. The assessee explained that 400 gms. belonged to his mother and the rest to his wife. The ITO accepted 400 gms. as explained. The Tribunal found the explanation bona fide and substantiated, noting the absence of contrary evidence.

Fixed Deposit Receipts (FDRs):
The FDRs worth Rs. 60,000 were explained as financed from a loan of Rs. 50,000 and Rs. 10,000 of the assessee's own savings. The Tribunal found the explanation bona fide and substantiated, supported by a confirmation certificate and the appearance of the lender in proceedings under section 132(5).

5. Impact of Surrender of Income
The Tribunal held that the surrender of income by the assessee to buy peace did not equate to an admission of concealment. The surrender was made under compelling circumstances, including harassment and the threat of prosecution. The Tribunal cited case law to support that penalty cannot be levied merely because the assessee agreed to be assessed on a particular amount unless it is shown to be the income of the assessee for the relevant year.

Conclusion
The Tribunal concluded that:
- The assessee's explanations for the assets found during the search were bona fide and substantiated.
- The surrender of income was made to buy peace and did not constitute an admission of concealment.
- The penalties under section 271(1)(c) were not justified and were accordingly cancelled.

The appeals were allowed, and the penalties levied on the assessee were cancelled.

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