1983 (4) TMI 108 - AT - Income Tax

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the IT Act, 1961 for the assessment years 1975-76 and 1976-77.
2. Evaluation of the revised returns filed by the assessee.
3. Determination of whether the assessee's actions constituted concealment of income.
4. Applicability and interpretation of the Explanation to Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) for AY 1975-76:
The penalty for concealment under Section 271(1)(c) imposed by the Income Tax Officer (ITO) and sustained by the Appellate Assistant Commissioner (AAC) was Rs. 19,000. The assessee, a proprietor of a sarafa business, initially filed a return showing a total income of Rs. 8,730. A revised return was later filed showing a total income of Rs. 13,310, which included an additional amount of Rs. 10,000. The ITO found that the assessee failed to disclose two amounts of Rs. 10,000 each in the original return. The ITO concluded that the revised return was filed out of fear of detection due to a notice under Section 143(2). Consequently, the ITO imposed a penalty, which was upheld by the AAC.

2. Evaluation of the Revised Returns Filed by the Assessee:
The assessee explained that the Rs. 10,000 included in the revised return was related to a partition of HUF property and the sale of trees. The ITO, however, insisted on the production of Horilal, who had purchased the trees, but his whereabouts were unknown. The assessee offered the amount for assessment to avoid penalties. Another Rs. 10,000 was surrendered in the revised return, constituted of cash credits from relatives. The assessee claimed these were raised to make compensatory payments as per a partition suit award. The ITO ignored the business income shown in the revised return and adhered to the original return's amount.

3. Determination of Whether the Assessee's Actions Constituted Concealment of Income:
The Tribunal found no evidence of detection or process of detection by the ITO that could have led to the conclusion that the cash credits represented concealed income. The Tribunal held that the disclosure of Rs. 10,000 in the revised return was voluntary, aimed at avoiding litigation and embarrassment. The Tribunal also noted that the assessee had provided evidence for the Rs. 10,000 claimed to be from the sale of trees, although the ITO did not accept it.

4. Applicability and Interpretation of the Explanation to Section 271(1)(c):
The Tribunal acknowledged that the Explanation to Section 271(1)(c) (as it stood before 1 April 1976) applied since the income declared in the original return was less than 80% of the income finally assessed. However, the Tribunal concluded that the assessee had discharged the burden of proving that the failure was not due to fraud or gross or willful neglect. The Tribunal distinguished the facts from other cited cases, noting that the revised return was filed voluntarily and not due to any detection process by the ITO.

Penalty for AY 1976-77:
For AY 1976-77, the ITO imposed a penalty of Rs. 3,500 based on a revised return that disclosed an additional Rs. 6,000 and an agreement to add Rs. 5,000 during assessment. The Tribunal found that the revised return was voluntary, aimed at avoiding prolonged proceedings, and not due to any detection by the ITO. The Tribunal also noted that the ITO found no specific defects in the accounts. The Tribunal concluded that there was no evidence of concealment and that the explanation provided by the assessee was bona fide.

Conclusion:
The Tribunal cancelled the penalties of Rs. 19,000 for AY 1975-76 and Rs. 3,500 for AY 1976-77, allowing the appeals by the assessee.

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