1989 (2) TMI 173 - AT - Income Tax

Assessment Year, Business Premises, Household Expenses, Income From Undisclosed Sources, Revised Returns

Summary

Issues Involved:
1. Reopening of assessments under section 143(2)(b).
2. Initiation and imposition of penalties under section 271(1)(c).
3. Explanation and substantiation of additional income disclosed in revised returns.
4. Validity of penalties in light of revised returns filed voluntarily.
5. Consideration of household expenses and unexplained investments as concealed income.

Detailed Analysis:

1. Reopening of Assessments under Section 143(2)(b):
In several appeals (ITA Nos. 84, 102, 103, 106), assessments were initially completed under section 143(1). These assessments were subsequently reopened under section 143(2)(b) due to various reasons including search and seizure operations. The reopening was often accompanied by the filing of revised returns by the assessees, disclosing additional income.

2. Initiation and Imposition of Penalties under Section 271(1)(c):
Penalties were initiated under section 271(1)(c) for concealment of income. The Income Tax Officer (ITO) imposed penalties based on the additional income disclosed in the revised returns, which the assessees claimed was done to "buy peace" with the department. The Appellate Assistant Commissioner (AAC) deleted the penalties in some cases, reasoning that the revised returns were filed without any material in the possession of the ITO indicating concealment.

3. Explanation and Substantiation of Additional Income Disclosed in Revised Returns:
In ITA No. 87, the assessee disclosed additional income of Rs. 8,000 related to cash represented by a demand draft, stating it was a gift received during family marriages. However, this explanation was not substantiated. Similarly, in ITA No. 104, a minor assessee offered Rs. 25,000 for taxation to explain an FDR purchase, which the ITO treated as concealed income.

4. Validity of Penalties in Light of Revised Returns Filed Voluntarily:
The Tribunal considered whether the filing of revised returns before detection by the department exonerated the assessees from penalties. The Tribunal cited several precedents where penalties were upheld despite voluntary revised returns, emphasizing that the concealment offense was complete upon filing the original return. The Tribunal concluded that the revised returns did not obliterate the offense of concealment.

5. Consideration of Household Expenses and Unexplained Investments as Concealed Income:
The Tribunal noted that the standard of living of the assessees was high, with significant unexplained household expenses and investments (e.g., FDRs, jewellery, cars). These were treated as income from undisclosed sources. The Tribunal rejected the contention that household expenses could not form the basis of penalty, equating unexplained household expenses with unexplained investments.

Conclusion:
The Tribunal upheld the penalties under section 271(1)(c), concluding that the assessees failed to substantiate their explanations for the additional income disclosed in revised returns. The Tribunal emphasized that the onus was on the revenue to prove concealment, which was sufficiently discharged. However, considering that the penalties were based on admissions by the assessees, the Tribunal ordered that minimum penalties leviable under the law be imposed. Consequently, the assessees' appeals were dismissed, and the departmental appeals were allowed with the qualification of reduced penalties.