1978 (1) TMI 94 - AT - Income Tax

Issues Involved:
1. Jurisdiction of the Income-tax Officer to impose penalties under Section 271(1)(c) of the Income-tax Act, 1961.
2. Alleged concealment of income by the assessee.
3. Validity of the notice issued under Section 271(1)(c).
4. Applicability of the amendment to Section 274 of the Income-tax Act.
5. Quantum of penalties imposed.

Detailed Analysis:

Jurisdiction of the Income-tax Officer to Impose Penalties:
The primary issue revolves around whether the Income-tax Officer had the jurisdiction to impose penalties under Section 271(1)(c) after the amendment to Section 274, which was introduced by the Taxation Laws (Amendment) Act, 1970, effective from April 1, 1971. The amendment altered the conditions under which the Income-tax Officer had to refer cases to the Inspecting Assistant Commissioner. The Tribunal held that the law applicable is the one prevailing on the date of the initiation of penalty proceedings, not the date of filing the return. Therefore, the Income-tax Officer had jurisdiction under the amended section to impose penalties without referring the matter to the Inspecting Assistant Commissioner, as the penalties were initiated after the amendment came into force.

Alleged Concealment of Income:
The assessee had constructed a property and let it out from November 10, 1967, but failed to disclose the income from this property in the returns for the assessment years 1968-69 to 1971-72. The Income-tax Officer reopened the assessments and issued notices under Section 148. The assessee claimed that the omission was due to a bona fide belief that the income was exempt for three years. However, the Tribunal found this claim improbable and held that there was deliberate concealment of income. The assessee failed to discharge the onus under the Explanation to Section 271(1)(c), which required showing that the omission was not due to fraud or gross or willful neglect.

Validity of the Notice Issued Under Section 271(1)(c):
The assessee contested the validity of the notice issued under Section 271(1)(c) and the jurisdiction of the Income-tax Officer to impose the penalty. The Tribunal upheld the validity of the notices and the jurisdiction of the Income-tax Officer, stating that the law applicable is the one prevailing on the date of the initiation of penalty proceedings.

Applicability of the Amendment to Section 274:
The Tribunal considered whether the amendment to Section 274, which changed the procedural requirements for imposing penalties, could apply to pending proceedings. The Tribunal held that the amendment relates to procedural law, which applies to pending proceedings. The Tribunal rejected the contention that the amendment was intricately linked with substantive law and therefore could not apply to pending proceedings. It was noted that procedural amendments apply to the law as it stands on the date of initiation of penalty proceedings.

Quantum of Penalties Imposed:
Regarding the quantum of penalties, the Tribunal found that the penalties imposed for the assessment years 1968-69 and 1969-70 included amounts for unexplained investments, which could not be regarded as concealed income. The concealed income for these years was determined to be Rs. 780 and Rs. 4,430, respectively. The Tribunal reduced the penalties to the minimum imposable under the law. For the assessment year 1971-72, the penalty imposed exceeded the maximum prescribed, making the order void ab initio. The Tribunal directed the Income-tax Officer to recompute the penalties and refund any excess amounts.

Conclusion:
The Tribunal partly allowed the appeals, holding that the Income-tax Officer had jurisdiction to impose penalties under the amended Section 274, that there was deliberate concealment of income, and that the penalties should be reduced to the minimum imposable under the law. The Tribunal directed the Income-tax Officer to recompute the penalties and refund any excess amounts.

← Previous Next →