1997 (4) TMI 118 - AT - Income Tax

Summary

Issues:
- Appeal against cancellation of penalty under section 271(1)(c) of the Income-tax Act, 1961 by the Commissioner of Income-tax (Appeals), Jabalpur.
- Interpretation of Explanation 5 to section 271(1)(c) regarding deemed concealment in cases of search under section 132.
- Assessment of penalty based on discrepancies in income disclosure related to investment in pawned articles.

Analysis:

The appeal in this case concerns the cancellation of a penalty of Rs. 2,85,000 imposed under section 271(1)(c) of the Income-tax Act, 1961 by the Commissioner of Income-tax (Appeals), Jabalpur. The penalty was levied due to discrepancies in the income disclosure related to investment in pawned articles following a search and seizure operation at the assessee's premises. The Assessing Officer had assessed the income at Rs. 5,50,460, which was later reduced to Rs. 3,90,460 on appeal. The penalty was invoked under Explanation 5 to section 271(1)(c) of the Income-tax Act, which deals with deemed concealment in cases of search under section 132.

During the appeal, the Departmental Representative argued that the assessee did not fully rely on the Girvi Register, and therefore, should not benefit from the exceptions provided in Explanation 5. The representative contended that the books of account maintained by the assessee were not entirely reliable. However, the assessee's counsel argued that the girvi transactions were duly recorded in the books of account found during the search, meeting the requirements of the exception under Explanation 5.

The Tribunal analyzed the facts and exceptions under Explanation 5 in detail. It noted that the assessee maintained a Girvi Register for its pawning business, with the total investment recorded as Rs. 5,53,475. The assessee offered Rs. 3,77,475 as income from the pawning business, which was later accepted post-appeal. The Tribunal held that the transaction giving rise to the income was correctly recorded in the seized books of account, satisfying the first exception under Explanation 5.

Furthermore, the Tribunal emphasized that the exceptions under Explanation 5 are alternative, and once the assessee's case falls under any exception, the penalty for concealment cannot be imposed. It clarified that for the purpose of Explanation 5, the only requirement is that the transaction is recorded in the books of account, not that the books are correct or complete for profit deduction. Therefore, the Tribunal upheld the decision of the CIT(Appeals) to cancel the penalty of Rs. 2,85,000, dismissing the Revenue's appeal.

In conclusion, the Tribunal's detailed analysis of the interpretation of Explanation 5 and its application to the facts of the case resulted in the dismissal of the Revenue's appeal against the cancellation of the penalty under section 271(1)(c) of the Income-tax Act, 1961.