9911796707
TMI Blog2001 (8) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... ing account. The Assessing Officer initiated a penalty proceeding under section 271(1)(c) of the Act. After considering the submissions of the assessee, the Assessing Officer has imposed a penalty of Rs.4,50,000 under section 271(1)(c) of the Act. In appeal before the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals) has reduced the penalty amount of Rs.1,90,000 and allowed relief of Rs.2,60,000. In appeal before the Tribunal, the Tribunal has cancelled the penalty in toto imposed by the Assessing Officer. None appears for the assessee. Heard learned counsel for the Revenue. In the facts and reasons given by the Tribunal, the Tribunal has considered its reasoning in paragraph 5 of its order for ready reference which reads as under: " We have carefully considered the facts of the case and the arguments advanced by both the parties. We have also gone through the judicial decisions cited by both the parties. We find from the order of the Tribunal for the assessment year 1974-75 relating to the addition of Rs.4,84,000 against the hypothecation of stock of raw materials, stores, finished goods, etc., that the Tribunal has found that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 133 (Mad), their Lord ships held that it is necessary to establish actual evidence of concealment for the purpose of imposing penalty under section 271(1)(c). On the facts of the said case it was held that concealment of income be presumed but the imposition of penalty cannot be sustained. In the case of CIT v. Rudrappan and Co. [1984] 147 ITR 204 (Mad), it was held that when the assessee gave declaration of stocks to the bank at a higher value than what was shown in the books of account in order to obtain higher loan and the Tribunal confirmed the addition it was justified but levy of penalty under section 271(1)(c) was not justified as there was no proof that excess stock had been sold. In the case of CIT v. M. B. Engineering Works (P.) Ltd. [1986] 158 ITR 509, the Calcutta High Court has held that before penalty under section 271(1)(c) can be imposed, the authorities have to bring on record cogent material or circumstances leading to a reasonable conclusion that the amount added in the assessment represents the assessee's income. Merely because a particular amount has been assessed as its income it is not enough for the purposes of levying penalty. It has, therefore, been held o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held in a number of decisions cited above. The addition of Rs.1,84,360 on the ground of unaccounted for purchase of items of stock, etc., on the basis of which the Commissioner of Income-tax (Appeals) sustained a penalty of Rs.1,90,000 also stands on the same footing as the addition of Rs.2,50,000 sustained by the Tribunal and the Commissioner of Income-tax (Appeals). In view of the above and applying the ratio of the decisions of the various High Courts cited and relied on by the assessee's counsel we are of the opinion that the levy of penalty under section 271(1)(c) of the Income-tax Act is not justified. Accordingly, the appeal is allowed.' The penalty under section 271(1)(c) is not automatic on the basis of the addition made or part of the addition sustained in appeal. In assessment, addition can be on the basis of presumption. But, in penalty, the Assessing Officer has to establish that there is conscious concealment. This aspect has been considered by the Madras High Court in M. Radhakrishniah v. CIT [1984] 147 ITR 133. The Madras High Court has observed at pages 138 and 139 as under: "At the hearing, some earlier reported cases were referred to by both sides. We do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concealed income itself. Besides, under the provision as amended in 1968, every rupee of penalty must be justified on every rupee of concealment and on no other basis. In this manner, it must be held to have been enacted not as a mere quantification provision, but as constituting the very crux of the penal liability. The Tribunal as well as the Inspecting Assistant Commissioner have not understood the requirement of this provision and have, proceeded to levy penalty on amounts which are not stated to be amounts of income actually concealed. In the result, questions Nos. 2 and 3 are answered in favour of the assessee. In view of this answer of ours, we would phrase our answer to the first question thus: While the provisions of section 271 (1)(c) were attracted up to a point, on the facts and in the circumstances of the case, the penalty levied or sustained by the Tribunal cannot be justified merely on the facts which justify the initiation of proceedings under section 271(1)(c). The justification for actual imposition of penalty must be found under section 271(1)(iii) of the Act which we have held does not apply to the present case as our answers to the two other questions w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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