1980 (2) TMI 122 - AT - Income Tax

Summary

Issues:
Levy of penalty under section 271(1)(c) of the IT Act, 1961 based on additions made towards the total income of the assessee including personal expenses, income from property, and interest in the names of the assessee's two wives.

Analysis:
The appeal was filed against the order of the AAC upholding the penalty of Rs. 18,335 under section 271(1)(c) of the IT Act, 1961. The assessee derived income from a liquor contract business, with the assessment completed by the ITO resulting in additions to the total income. These additions included personal expenses, income from property in the names of the assessee's two wives, and interest income. The ITO initiated penalty proceedings and levied the penalty, which was upheld by the AAC and the Tribunal.

During the assessment, it was found that the household expenses shown by the assessee were low, leading to an addition. Regarding the income from property and interest in the names of the two wives, the assessee claimed that the property was transferred to his wives through genuine sale deeds, and the income was disclosed in their returns and assessed separately. However, the authorities considered the transactions as benami and included the income in the assessee's total income.

In the penalty proceedings, the assessee argued that the transactions were genuine, supported by registered sale deeds, and the wives had disclosed the income. The Tribunal upheld the penalty, stating that the transactions were not genuine. The assessee appealed, reiterating that the transactions were valid and supported by evidence. The High Court decision and various Supreme Court judgments were cited to support the contention that penalty under section 271(1)(c) was not applicable.

The Tribunal found in favor of the assessee, stating that the explanation provided, though not accepted, did not warrant a penalty. The Tribunal emphasized that the income from property and interest was separately shown and assessed in the wives' names, and the assessee's attempt to divert income did not constitute concealment. Citing Supreme Court judgments, the Tribunal concluded that the penalty was not justified, and the appeal was allowed, canceling the penalty of Rs. 18,335 under section 271(1)(c) upheld by the AAC.