1994 (10) TMI 121 - AT - Income Tax

Summary

Issues Involved:
1. Validity of penalties under sections 271(1)(c) and 273 of the Income-tax Act, 1961.
2. Impact of the order passed by the Commissioner under section 273A on the pending appeals.
3. Applicability of section 132(4) read with Explanation 5 to section 271(1)(c).
4. Alleged failure to follow principles of natural justice in the order under section 273A.
5. Competence of appeals after an order under section 273A.

Issue-wise Detailed Analysis:

1. Validity of Penalties Under Sections 271(1)(c) and 273:
The assessees contended that the additional income disclosed was a voluntary surrender and not a concealment of income, thus penalties under sections 271(1)(c) and 273 were not justified. They argued that no evidence was collected by the department to show concealment. The Tribunal, however, noted that the penalties were levied based on the additional income disclosed in revised returns pursuant to a settlement after search operations. The department's representative cited the Madras High Court case of CIT v. Krishna & Co., supporting the imposition of penalties when the assessee admits the income as their own.

2. Impact of the Order Passed by the Commissioner Under Section 273A on the Pending Appeals:
The Tribunal focused on whether the appeals abate after the Commissioner's order under section 273A, which substantially reduced the penalties. The Tribunal concluded that once an order under section 273A is passed, the original penalty orders cease to exist in the eyes of the law, rendering the appeals infructuous. This conclusion was supported by the Calcutta High Court case of Smt. Ichhabai Panchal, which held that an appeal is not competent against an order passed under section 18(2A) of the Wealth-tax Act.

3. Applicability of Section 132(4) Read with Explanation 5 to Section 271(1)(c):
The assessees claimed entitlement to the benefit of section 132(4) read with Explanation 5 to section 271(1)(c), arguing that the disclosure was made in the wake of a raid. The Tribunal rejected this argument, noting that the issue at hand was not the validity of the Commissioner's order under section 273A but the impact of such an order on the pending appeals.

4. Alleged Failure to Follow Principles of Natural Justice in the Order Under Section 273A:
The assessees argued that the Commissioner did not follow the principles of natural justice by not providing an opportunity of being heard before reducing the penalties. The Tribunal dismissed this argument, stating that it was not the proper forum to challenge the validity of the Commissioner's order under section 273A.

5. Competence of Appeals After an Order Under Section 273A:
The Tribunal examined whether the appeals remain competent after an order under section 273A is passed. The Tribunal disagreed with the assessees' reliance on the Madras case of M.K.S. Vanavarayar and other cases, distinguishing them on facts. The Tribunal held that the penalty orders passed by the Assessing Officer cease to exist once the Commissioner passes an order under section 273A, thus making the appeals infructuous.

Conclusion:
The Tribunal dismissed all the appeals as infructuous, holding that the penalty orders originally passed by the Assessing Officer no longer exist in the eye of law after the Commissioner's order under section 273A. Consequently, the question of considering the case on merits did not arise.