1989 (9) TMI 177 - AT - Income Tax

Issues Involved:
1. Legitimacy of the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.
2. Voluntariness of the revised return filed by the assessee.
3. Relevance of the acquittal in criminal prosecution to the penalty proceedings.
4. Correctness of the peak credit amount considered for penalty.
5. Discrepancies in the accounts with Jupiter Ruling and Binding Works.

Detailed Analysis:

1. Legitimacy of the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961:

The penalty was imposed based on two items: the peak credit of Rs. 20,000 in the name of Dharmaraj, proprietor of M/s. Balaji Stores, and the amount of Rs. 29,547, which was the difference between Rs. 34,296 and Rs. 4,750, related to Jupiter Ruling and Binding Works. The Income-tax Officer (ITO) found discrepancies in the accounts and concluded that these amounts were concealed income.

2. Voluntariness of the revised return filed by the assessee:

The assessee filed a revised return on March 14, 1985, showing a total income of Rs. 99,464, which included an additional amount of Rs. 60,500. The assessee claimed that the revised return was filed voluntarily under section 139(5) of the Income-tax Act. However, the sequence of order-sheet entries indicated that the revised return was filed after the ITO had made inquiries and found discrepancies in the accounts. Therefore, the revised return was not considered voluntary.

3. Relevance of the acquittal in criminal prosecution to the penalty proceedings:

The Judicial Magistrate Court-I, Vellore, acquitted the assessee-firm and its partners in the criminal case. The Magistrate observed that the revised return was filed voluntarily, as there was no evidence that the Income-Tax Department had pointed out defects before the revised return was filed. The assessee's counsel argued that the findings of the criminal court should be conclusive in the penalty proceedings. However, the Departmental Representative contended that the acquittal in the criminal case does not preclude the imposition of penalty, citing the judgment in V. Datchinamurthy v. Asstt. Director of Inspection [1984] 149 ITR 341.

4. Correctness of the peak credit amount considered for penalty:

The ITO and the Commissioner (Appeals) considered the peak credit to be Rs. 20,000. However, the Tribunal found that the peak credit was only Rs. 10,000, not Rs. 20,000. Therefore, the penalty could be imposed only in respect of Rs. 10,000.

5. Discrepancies in the accounts with Jupiter Ruling and Binding Works:

The ITO found a credit balance of Rs. 34,296 in the name of Jupiter Ruling and Binding Works, while the actual amount due was only Rs. 4,750. The proprietor of Jupiter Ruling and Binding Works, Shri V.D. Sambandam, admitted that he had altered his books of accounts at the request of the assessee's partner. The assessee claimed that the balance was paid in the subsequent year but did not provide any evidence to support this claim.

Conclusion:

The Tribunal concluded that the revised return was not filed voluntarily, as it was prompted by the inquiries and findings of the ITO. The Tribunal upheld the imposition of penalty under section 271(1)(c) but directed that the penalty be recomputed based on the correct peak credit amount of Rs. 10,000 and the difference of Rs. 29,547 in the account of Jupiter Ruling and Binding Works. The appeal was allowed in part, and the ITO was directed to levy the minimum penalty applicable under the law for the concealment of Rs. 39,547.

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