1995 (7) TMI 132 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the IT Act, 1961.
2. Reduction of penalty quantum by CIT(A).
3. Concealment of income and furnishing of inaccurate particulars.
4. Applicability of Explanation 5 to Section 271(1)(c).
5. Assurances given during proceedings under Section 132(11).

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the IT Act, 1961:
The assessee, a partner in a firm, was subjected to a search and seizure operation where undisclosed income from money lending was discovered. The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars. The AO imposed a penalty of Rs. 1,64,900, equivalent to 125% of the tax on the concealed income. The CIT(A) confirmed the penalty but reduced the quantum to Rs. 1,31,925, the minimum amount imposable.

2. Reduction of Penalty Quantum by CIT(A):
The CIT(A) examined the objections raised by the assessee and agreed with the AO that the assessee had furnished inaccurate particulars of income, justifying the penalty. However, the CIT(A) reduced the penalty from 125% to the minimum amount of Rs. 1,31,925. This reduction caused dissatisfaction to both the assessee and the Revenue, leading to cross-appeals.

3. Concealment of Income and Furnishing of Inaccurate Particulars:
The Tribunal examined the material and arguments presented. The assessee initially admitted that the cash found during the search was undisclosed business income but later changed the explanation, claiming it was accumulated from a dairy business. The Tribunal rejected this explanation, finding it inconsistent and unsupported by credible evidence. The Tribunal upheld the penalty for the concealed income of Rs. 60,823 but found it unsafe to sustain penalties related to investments in gold and silver ornaments and interest income due to lack of positive evidence and reliance on deeming provisions.

4. Applicability of Explanation 5 to Section 271(1)(c):
The Tribunal did not delve into the applicability of Explanation 5 to Section 271(1)(c) as it was not relevant to the facts of the case. The Tribunal focused on the evidence and circumstances surrounding the concealment of income.

5. Assurances Given During Proceedings under Section 132(11):
The assessee claimed that assurances were given during proceedings under Section 132(11) that no penalty would be imposed if income was disclosed. The Tribunal found no such assurance in the written order and dismissed this argument. The Tribunal emphasized that judicial orders cannot be contradicted by oral evidence or affidavits.

Conclusion:
The Tribunal concluded that the penalty for the concealed income of Rs. 60,823 was justified and sustained it. Penalties related to other additions were canceled due to insufficient evidence. The appeal by the assessee was partly allowed, and the appeal by the Revenue was dismissed.