1980 (1) TMI 140 - AT - Income Tax

Summary

Issues Involved:

1. Validity of assessment under section 69A of the IT Act, 1961.
2. Justification of penalty under section 271(1)(c) for concealment of income.

Issue-wise Detailed Analysis:

1. Validity of Assessment under Section 69A of the IT Act, 1961:

The case revolves around the seizure of Rs. 1,30,785 from the premises of the assessee during a raid by the Enforcement Directorate on 29th July, 1965. The initial assessment under section 144 of the IT Act, 1961, determined the assessee's total income at Rs. 4 lakhs for the assessment year 1966-67. The assessment was later revised, and the amount of Rs. 1,30,785 was added under the head "Other Sources" as unexplained money under section 69A of the Act. The assessee contested this addition, arguing that the money did not belong to him and that he had explained this to the authorities on the day of the raid.

The Income Tax Officer (ITO) and the Assistant Appellate Commissioner (AAC) both concluded that the money should be assessed in the hands of the assessee as unexplained money under section 69A, as the assessee failed to provide a satisfactory explanation for the source of the funds. However, upon review, it was found that there was no material evidence to prove that the assessee was the owner of the money. The statements given by the assessee to the Enforcement Directorate and the ITO consistently denied ownership of the money, and there was no substantial evidence to contradict these statements.

The Tribunal noted that the AAC was under the erroneous impression that the assessee did not disown the amount before the Enforcement Directorate. The Tribunal emphasized that for section 69A to be invoked, it must be established that the assessee was the owner of the money, and if no satisfactory explanation is provided, the money can be deemed as the assessee's income. In this case, the Tribunal found no material on record to establish the assessee's ownership of the seized amount, and thus, the addition of Rs. 1,30,785 was deleted.

2. Justification of Penalty under Section 271(1)(c) for Concealment of Income:

Following the assessment, the ITO referred the matter to the Inspecting Assistant Commissioner (IAC) for the levy of penalty under section 271(1)(c) for concealment of income. The IAC imposed a penalty of Rs. 50,000, holding that the assessee had concealed the particulars of his income and furnished inaccurate particulars thereof.

The Tribunal, however, found that the penalty was not warranted. The Tribunal noted that the assessee had consistently denied ownership of the money from the very day of the raid and throughout the proceedings. The Tribunal also observed that the order of the Enforcement Directorate, which was relied upon by the Revenue, was passed after the assessment order and did not conclusively establish the assessee's ownership of the money.

The Tribunal concluded that there was no justification for the penalty as the addition itself was not warranted. Consequently, the penalty under section 271(1)(c) was also cancelled.

Conclusion:

In conclusion, the Tribunal allowed the appeals, holding that the addition of Rs. 1,30,785 as unexplained money under section 69A was not justified due to the lack of material evidence proving the assessee's ownership of the money. Consequently, the penalty under section 271(1)(c) for concealment of income was also cancelled.