1981 (12) TMI 75 - AT - Income Tax

Summary

Issues:
1. Penalty under section 271(1)(c) for alleged concealment of income.
2. Source of funds for the acquisition of property by the assessee's wife.
3. Addition of unaccounted expenses for marriage and domestic expenditures.

Detailed Analysis:
1. The appeals before the Appellate Tribunal ITAT Hyderabad-A arose from an order under section 271(1)(c) passed by the Income Tax Officer (ITO) levying a penalty of Rs. 19,500 for the assessment year 1972-73. The Additional Commissioner of Income Tax (Appeals) [AAC] had reduced the penalty by Rs. 8,500. The assessee challenged the AAC's decision to sustain a penalty of Rs. 11,000, while the revenue contended that the penalty should have been sustained to the extent of Rs. 1,000 for marriage expenses.

2. The primary issue revolved around the source of funds for the purchase of land by the assessee's wife. The ITO questioned the explanation provided by the assessee and his wife regarding the accumulation of funds, considering it improbable. The ITO also initiated penalty proceedings under section 271(1)(c) based on the findings during the assessment. The AAC upheld the penalty, deeming the explanation for the source of funds as far-fetched.

3. Apart from the land purchase issue, other additions were made by the ITO, including unaccounted expenses for marriage and domestic expenditures. The ITO levied a penalty of Rs. 8,500 for these additions. The AAC, however, opined that no penalty could be imposed for concealment of income related to these expenses.

4. The assessee argued that the ITO failed to establish the necessary ingredients under section 271(1)(c) for levying a penalty. The assessee maintained that the property was purchased solely by his wife, supported by their statements. The assessee contended that there was no basis for the penalty.

5. The Department asserted that the assessee did not respond to the penalty notice, shifting the onus onto the assessee. It was argued that the ITO had provided sufficient evidence to justify the penalty under section 271(1)(c), emphasizing the implausibility of the assessee's explanations and the assessment under section 68.

6. The disagreement extended to the penalty on unaccounted marriage and domestic expenses. The Department contended that since the assessee admitted to incurring Rs. 1,000 for the daughter's marriage, a penalty should be sustained. The assessee argued that the expenses were covered by withdrawals made by both the assessee and his sons in the business.

7. The Tribunal ruled in favor of the assessee, emphasizing that the ITO must present positive evidence of income concealment to levy a penalty under section 271(1)(c). The Tribunal found the explanation regarding the land purchase plausible, noting the lack of evidence to refute it, and canceled the penalty of Rs. 11,000.

8. Regarding the Rs. 1,000 expense for the daughter's marriage, the Tribunal sided with the assessee, stating that the expense could have been covered by accounted funds. The AAC's decision to cancel the penalty of Rs. 8,500, including the Rs. 1,000, was deemed justified.

9. Consequently, the Tribunal dismissed the department's appeal and allowed the assessee's appeal, leading to the cancellation of the penalties imposed.