2003 (8) TMI 191 - AT - Income Tax

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the IT Act, 1961 for the assessment year 1993-94.

Analysis:
The appeal arose from an order by the CIT(A) upholding a penalty of Rs. 49,570 imposed on the assessee under section 271(1)(c) of the IT Act, 1961. The case involved a search conducted on the assessee and family members resulting in the seizure of cash and surrendered income. The AO observed that the tax and interest were not fully paid on the surrendered income, leading to the imposition of the penalty.

The assessee contended that the conditions for immunity from penalty under Explanation 5 to section 271(1)(c) were met, arguing that the tax payment condition was fulfilled through adjustments requested at the time of filing the return. The Chief CIT's order directed the AO to treat a portion of the seized cash as advance tax, supporting the assessee's claim for penalty deletion.

The Departmental Representative opposed the appeal, emphasizing that the tax was not fully paid, as evidenced by the adjusted amounts against tax liabilities. The Department argued that subsequent adjustments from another account did not satisfy the tax payment requirement under Explanation 5.

The Tribunal analyzed the facts and submissions, noting the seized cash adjustments claimed by the assessee and another connected party. The Tribunal found that the assessee's initial intent was to adjust the seized cash against the tax liability, and the subsequent adjustments made by the Revenue did not align with the assessee's claim. Consequently, the Tribunal concluded that the conditions of Explanation 5 were met regarding tax and interest payments on the surrendered income, leading to the deletion of the penalty upheld by the CIT(A).

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee and deleting the penalty imposed under section 271(1)(c) of the IT Act, 1961 for the assessment year 1993-94.