2006 (7) TMI 263 - AT - Income Tax

Summary

Issues Involved:
1. Short payment of Tribunal fee and condonation of delay.
2. Imposition of penalty under section 271(1)(c) for concealment of income.
3. Applicability of Explanation 5 to section 271(1)(c) regarding surrendered income during search.

Detailed Analysis:

1. Short Payment of Tribunal Fee and Condonation of Delay:
The assessee initially paid a Tribunal fee of Rs. 500, which was less than the prescribed amount of Rs. 4,539. Upon receiving a defect memo, the assessee contended that the fee was correctly paid under section 253(6)(d) as the appeal was against a penalty and not against the quantum of income. Despite maintaining this position, the assessee eventually paid the difference of Rs. 4,039 to avoid dispute. The Tribunal considered whether the delay in payment could be condoned, referencing the Special Bench decision in Bidyut Kumar Sett v. ITO, which linked the filing fee with the amount of income assessed, including appeals against penalty for concealment.

The Tribunal noted that the right to appeal is a statutory right subject to conditions, and the appeal could only be deemed filed when the full fee was paid. The Tribunal referenced the ITAT Delhi 'A' Bench decision in Mohan Anand v. WTO, which allowed condonation of delay in similar circumstances. Following this precedent, the Tribunal admitted the appeal for hearing, considering the assessee's eventual compliance and the advice received.

2. Imposition of Penalty Under Section 271(1)(c) for Concealment of Income:
The assessee filed a return showing income of Rs. 54,594, which was later revised to Rs. 83,094 following a search operation. The assessment determined undisclosed income at Rs. 3,99,251, later reduced to Rs. 1,02,000 by the ITAT. The Assessing Officer imposed a penalty of Rs. 60,000 for concealment of income. The assessee argued that the penalty should not be imposed as the addition was based on estimates, and the surrendered amount of Rs. 28,500 should not attract penalty.

The Tribunal upheld the penalty, referencing the Supreme Court decision in B.A. Balasubramaniam & Bros. Co. v. CIT, which allowed penalty imposition even on estimated additions if the difference between assessed and returned income exceeded 20%. The Tribunal found the assessee's explanation for the discrepancy to be false, thereby attracting Explanation 1 to section 271(1)(c).

3. Applicability of Explanation 5 to Section 271(1)(c) Regarding Surrendered Income During Search:
The Tribunal considered the applicability of Explanation 5 to section 271(1)(c) concerning the surrendered income of Rs. 28,500 during the search. The Madras High Court decision in CIT v. S.D.V. Chandru was cited, which provided immunity from penalty for undisclosed income surrendered during a search and disclosed in the return, provided the tax and interest were paid.

Following this precedent, the Tribunal directed that the penalty should not be imposed on the surrendered amount of Rs. 28,500. Consequently, the penalty was to be restricted to the addition of Rs. 73,500, with necessary relief granted to the assessee.

Conclusion:
The Tribunal admitted the appeal after condoning the delay in payment of the Tribunal fee. On merits, the penalty under section 271(1)(c) was upheld but restricted to the addition of Rs. 73,500, excluding the surrendered amount of Rs. 28,500. The appeal was partly allowed, providing the assessee with partial relief.