1992 (4) TMI 95 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the IT Act, 1961.
2. Validity of reassessment proceedings.
3. Examination of brokerage or commission claim.
4. Burden of proof for concealment of income.
5. Applicability of law for penalty computation.
6. Quantum of penalty.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The assessee filed two appeals related to the levy of penalty under Section 271(1)(c) of the IT Act, 1961. One appeal challenged the order upholding the penalty of Rs. 1,52,159 at 150% of the income held concealed. The other appeal contested the rejection of the assessee's application under Section 154, which claimed that the penalty should be levied based on the law operative on the date when the penalty proceedings were initiated, not when the return was filed.

2. Validity of Reassessment Proceedings:
The reassessment proceedings were initiated based on information that M/s Mahaskar Enterprises (ME) was involved in providing "accommodation" in the nature of "Hawala" entries and was not a genuine party. The ITO issued a notice under Section 148, and the reassessment was completed disallowing the brokerage claim of Rs. 1,01,439.

3. Examination of Brokerage or Commission Claim:
The brokerage claim was disallowed based on an affidavit by Maruti Shanker Kharade, the alleged proprietor of ME, stating that he had not done any genuine business and issued Hawala sale bills. The ITO and CIT(A) found that the brokerage was not genuine and disallowed the claim. The Tribunal upheld this disallowance, noting the lack of evidence for brokerage services rendered by Kharade.

4. Burden of Proof for Concealment of Income:
The burden of proving concealment of income was on the Department. The Tribunal found that the Department did not provide sufficient evidence to prove that the brokerage claim was false. The penalty proceedings require a fresh examination of the material, and the Tribunal noted that the material on record did not conclusively prove concealment or fraud by the assessee.

5. Applicability of Law for Penalty Computation:
The Tribunal referred to the decision in Nem Kumar Tholia vs. Addl. CIT, where it was held that the law applicable for penalty is the law as it stood on the date of filing the return. The penalty was to be computed based on the income held concealed, not the tax evaded.

6. Quantum of Penalty:
The Tribunal considered whether the penalty imposed at 150% of the income concealed was justified. It found that in the absence of conclusive evidence of concealment, the penalty should not have been imposed. Even if penalty were justified, there were no aggravating factors to warrant a penalty higher than the minimum prescribed rate of 100%.

Conclusion:
The Tribunal concluded that no case of penalty under Section 271(1)(c) was made out due to the lack of conclusive evidence of concealment. The penalty was canceled, and the appeal challenging the penalty was allowed. The appeal regarding the quantum of penalty was dismissed as it was not applicable in the absence of a valid penalty.