1985 (8) TMI 141 - AT - Income Tax

Summary

Issues:
1. Penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for alleged concealment of income.
2. Jurisdiction of the Income-tax Officer to levy penalty under section 274(2) of the Act.

Detailed Analysis:

Issue 1: Penalty imposed under section 271(1)(c) for alleged concealment of income
The appeal was filed by the department against the cancellation of a penalty of Rs. 50,000 levied on the assessee under section 271(1)(c) of the Income-tax Act, 1961. The penalty was imposed by the Income-tax Officer (ITO) for concealing income related to the addition of Rs. 50,000 in the cost of construction declared by the assessee-firm. The Commissioner (Appeals) cancelled the penalty, stating that the difference in the cost of construction was merely an estimate and that the department had not established the actual amount concealed with certainty. The Commissioner held that for penalty to be levied, there must be a finding of deliberate furnishing of inaccurate particulars. The Commissioner also noted that the penalty was levied under the main provisions as well as Explanation to section 271(1)(c), but as the difference was mostly due to estimated additions, the Explanation did not apply. The Commissioner concluded that no penalty could be levied for concealment, and hence, cancelled the penalty order.

Issue 2: Jurisdiction of the Income-tax Officer to levy penalty under section 274(2)
The department contended that the ITO had the jurisdiction to levy the penalty under section 274(2) of the Act as in force on the date he was satisfied about the concealment of income. The department relied on a Supreme Court decision to support this argument. On the other hand, the assessee argued that since the return was filed on a specific date, the law prevailing on that date should apply, and thus, the IAC and not the ITO had the jurisdiction to impose the penalty. The Tribunal found that the department's case lacked merit. The Tribunal observed that the case involved a mere estimate of the cost of construction, and the assessee had produced a report of an approved valuer to support its valuation. The Tribunal held that there was no evidence of dishonest intention or fraud on the part of the assessee in declaring the cost of construction. Therefore, the Tribunal upheld the cancellation of the penalty and did not delve further into the question of the ITO's jurisdiction to levy the penalty.

In conclusion, the Tribunal dismissed the appeal, affirming the cancellation of the penalty imposed under section 271(1)(c) for alleged concealment of income. The Tribunal found that the assessee had acted in good faith and that the penalty was not justified based on the circumstances of the case.