1989 (7) TMI 170 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee is liable for penalty for concealment of income for the assessment years 1972-73 to 1976-77.
2. Whether the returns filed by the assessee on 1-5-1977 were voluntary and in good faith.
3. Whether there was an oral agreement or understanding between the assessee and the Commissioner that no penalties would be levied or they would be waived.

Detailed Analysis:

1. Liability for Penalty for Concealment of Income
The assessee, a registered firm engaged in the preparation and sale of sweets, initially filed returns showing lower incomes for the assessment years 1972-73 to 1976-77. On 1-5-1977, the assessee filed revised returns admitting higher incomes for these years, which were significantly higher than the originally assessed incomes. The main controversy was whether the Commissioner had agreed to waive the penalties for concealment of income. The Income-tax Officer (ITO) issued notices under section 271(1)(c) for concealment of income and imposed penalties based on the difference between the original and revised returns. The Appellate Assistant Commissioner (AAC) upheld the penalties, finding no evidence of an agreement to waive penalties. The Tribunal, however, found that there was concealment of income, but the penalties should be canceled based on an alleged oral agreement with the Commissioner.

2. Voluntary and Good Faith Filing of Returns
The Tribunal examined whether the returns filed on 1-5-1977 were voluntary and in good faith. The assessee claimed the returns were filed voluntarily to buy peace with the Department. However, the Tribunal found that the returns were filed due to the necessity to show resources for purchasing a property, indicating that the returns were not filed in good faith. The Tribunal noted that the returns were filed under the constraint of potential adverse action by the Department, which negates the voluntary nature of the filings. The Tribunal concluded that the returns were neither voluntary nor in good faith.

3. Oral Agreement or Understanding for Waiver of Penalties
The Tribunal analyzed whether there was an oral agreement or understanding between the assessee and the Commissioner that no penalties would be levied. The Tribunal found no written evidence of such an agreement. The assessee's repeated reminders to the Commissioner about the assessments did not mention any agreement on penalties. The Tribunal noted that the Commissioner had not given any assurance in writing and had, in fact, rejected the assessee's petition for waiver of penalties under section 273A. The Tribunal concluded that there was no oral agreement or understanding for the waiver of penalties.

Conclusion:
The Tribunal, after considering all the facts and circumstances, concluded that:
1. There was clear concealment of income by the assessee.
2. The returns filed on 1-5-1977 were neither voluntary nor in good faith.
3. There was no oral agreement or understanding between the assessee and the Commissioner for the waiver of penalties.

The Tribunal canceled the penalties based on the alleged oral agreement, but the Third Member disagreed, emphasizing that the penalties were justified due to the concealment of income and the lack of voluntary and good faith filing of returns. The matter was referred to the President of the Income-tax Appellate Tribunal for a final decision.