1997 (9) TMI 153 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessments under sections 143(2)(ii) and 148.
2. Levy of penalty under section 271(1)(c) for concealment of income.
3. Validity of penalties based on revised returns filed after search operations.
4. Applicability of the Tribunal's quantum appeal orders to penalty proceedings.
5. Burden of proof under Explanation 1 to section 271(1)(c).

Issue-wise Detailed Analysis:

1. Reopening of Assessments under Sections 143(2)(ii) and 148:
The appeals involve foreign technicians employed by M/s. GEC Turbine Generator India Ltd., a non-resident company. Following search operations under sections 133A and 132, it was found that the salary value of perquisites and other benefits disclosed by the employees did not reflect the actual payments made to them. Consequently, the completed assessments for various years were reopened under sections 143(2)(ii) or 148.

2. Levy of Penalty under Section 271(1)(c) for Concealment of Income:
The Assessing Officer (AO) levied penalties under section 271(1)(c) on the basis that the assessees concealed particulars of their income in their original returns. Despite the Tribunal allowing certain reliefs in quantum appeals, the AO continued to levy penalties on the entire amount of additions, including those deleted by the Tribunal.

3. Validity of Penalties Based on Revised Returns Filed After Search Operations:
Some employees filed revised returns declaring higher amounts of salary and perquisites as agreed by the employer-company in a settlement application. The CIT(A) held that the difference between the income stated in the original returns and the income determined after giving effect to the Tribunal's orders constituted concealed income. The CIT(A) directed the AO to delete penalties for additions reduced or deleted by the Tribunal but to maintain penalties for income differences not explained by the assessees.

4. Applicability of the Tribunal's Quantum Appeal Orders to Penalty Proceedings:
The Tribunal had previously decided quantum appeals in the cases of 23 and 13 employees, respectively, and deleted certain additions made by the AO. The CIT(A) ruled that the Tribunal's orders were binding on the AO until set aside by a higher authority. Thus, penalties were not justified for additions reduced or deleted by the Tribunal.

5. Burden of Proof under Explanation 1 to Section 271(1)(c):
The CIT(A) and Tribunal emphasized that the burden of proof lies on the assessee to explain the difference between the income shown in the original returns and the income finally assessed. The Tribunal noted that the figures disclosed in the settlement petition represented actual payments, which were corroborated by statements filed before the Inland Revenue, UK. The Tribunal held that the failure of the assessees to furnish explanations for the differences led to an adverse inference, justifying the penalties.

Conclusion:
The appeals were decided based on the principles of law and the facts presented. The Tribunal upheld the CIT(A)'s decision to maintain penalties for the difference in income between the original returns and the final assessed income, as the assessees failed to provide satisfactory explanations. The appeals mentioned at Sl. Nos. 1 to 28 were dismissed, and those at Sl. Nos. 29 to 76 were disposed of with directions to the AO to restrict penalties based on the final assessed income after giving effect to the Tribunal's orders.