1991 (3) TMI 222 - AT - Income Tax

Summary

Issues:
1. Imposition of penalties under section 271(1)(c) and 271(1)(a) for the assessment years 1983-84 and 1984-85.
2. Whether penalties for concealment of income should be imposed.
3. Interpretation of provisions under section 273A and Explanation 2 and 5 of section 271.
4. Withdrawal of petition under section 273A and subsequent appeal against penalties.
5. Legal implications of deemed concealment of income and waiver of penalties by the Commissioner.

Detailed Analysis:
1. The appeals were against penalties imposed under sections 271(1)(c) and 271(1)(a) for the assessment years 1983-84 and 1984-85. The assessee, a registered firm, had disclosed additional income due to investments made from income earned from the manufacture of hand-made soaps. The assessments resulted in additions more than disclosed, leading to the imposition of penalties by the Income-tax Officer.

2. The main issue was whether penalties for concealment of income should be upheld. The assessee argued that no material showed income escapement apart from the disclosed amount. The appellate authority upheld the penalties based on established concealment. However, the assessee contended that penalties for earlier years were cancelled, and penalty proceedings for the subsequent year were dropped.

3. The interpretation of provisions under section 273A and Explanations 2 and 5 of section 271 was crucial. The amendments deemed disclosures as concealment of income but also provided for waiver if disclosures were made within a specified period. The withdrawal of the petition under section 273A raised questions about the Commissioner's duty to waive penalties as per the law in force at the time of the offense.

4. The withdrawal of the petition under section 273A and the subsequent appeal highlighted the legal implications of deemed concealment of income and the waiver of penalties by the Commissioner. The legal position at the relevant time dictated that penalties for deemed concealment should have been waived if disclosures were made within the prescribed period.

5. Ultimately, the Tribunal held that the penalties imposed under section 271(1)(c) could not be maintained due to the legal position at the time of the offense and the fulfillment of conditions for waiver by the assessee. The cancellation of penalties was justified to prevent subjecting the assessee to a greater punishment than what was in force when the offense occurred.