2003 (4) TMI 26 - HC - Income Tax

Penalty under section 271(1)(c) set aside where ownership of concealed income not proved despite addition under section 69A

HC set aside imposition of penalty under section 271(1)(c). Duplicate account books seized under s.133 led to addition under s.69A for quantum, but ... Imposition of penalty of section 271(1)(c) - quantum proceeding - concealment - search under section 133 - applicability of section 69A - duplicate account book was found where the opening balance shown exceeded the figure of the closing balance of the previous year disclosed in the return - added in the income of the assessee for the previous year - treatment of this amount as income for the relevant previous year - HELD THAT:- Admittedly, the income was added to the assessee for the relevant previous year. At the same time, the partners have also shown this amount as income in their revised return, which was alleged to have been filed in June, 1988, which we had found to be in March, 1989, in the quantum proceedings. But then Mr. Khaitan points out from the paper book that in the penalty proceedings, it was recorded as to have been submitted in June, 1988. Therefore, if we go by this finding of the income-tax authority, still then we cannot overlook that the return so submitted by the partners has since been accepted. The authorities have added the amount in the income of the assessee and then again assessed the same at the hands of the partners for the relevant previous year. Now having treated the same amount at the hands of the assessee, as well as at the hands of the partners, the Department cannot conclusively say or stick to one for the purpose of imposing penalty that there was concealment by the assessee. Inasmuch as in order to attract the mischief of concealment in a given case, it has to be treated under which provision the particular case is being governed. Admittedly, this amount was not shown in the books of account of the assessee and as such it could not have been treated under section 68. Admittedly, duplicate books of account were chanced upon by the income-tax authority in a search conducted under section 133. As such it would come under section 69A. For the purpose of quantum proceedings, it might attract a particular provision for addition to the income of the assessee. But when it comes to the question of imposition of penalty, then independent of the finding arrived at the quantum proceedings, the authority has to find out conclusively that the assessee owns this amount. There is nothing to show that the learned Tribunal has ever come to any conclusion that the assessee owned this amount. Even then in this case once it had added to the income of the assessee and then again the same amount has been accepted as income of the partners in their revised return, the income-tax authority is precluded from contending that the assessee is the owner of the amount or income. In this case, it appears that two views are possible. We, therefore, hereby answer the question in the negative, in favour of the assessee and having regard to the facts and circumstances of the case, we hereby set aside the impugned order of the learned Tribunal. Issues Involved:Quantum proceeding against the assessee, addition of amount in income for previous year, concealment under section 271(1)(c) of Income-tax Act, 1961, ownership of income by assessee or partners, relevance of findings in quantum proceedings for penalty imposition, interpretation of Explanation 1 to section 271(1)(c), applicability of section 69A, determination of concealment, two possible views on income ownership, imposition of penalty based on conclusive findings.Detailed Analysis:1. Quantum Proceeding and Addition of Amount in Income:The case involved a quantum proceeding against the assessee where a duplicate account book was found showing an opening balance exceeding the closing balance of the previous year. This amount was added to the income of the assessee for the previous year, leading to a potential case of concealment under section 271(1)(c) of the Income-tax Act, 1961. The issue revolved around the treatment of this amount as income for the relevant previous year.2. Contentions Raised by Counsel:The counsel for the assessee pressed three contentions. Firstly, he argued that the income shown in the opening balance could be treated as income for the following previous year, not conclusively determining concealment for the penalty proceedings. Secondly, he contended that the amount belonged to the partners, not the assessee, and the quantum proceeding's decision should not dictate penalty imposition. Thirdly, he highlighted discrepancies in the treatment of the amount by the Department, suggesting no conclusive proof of ownership by the assessee.3. Interpretation of Explanation 1 and Section 69A:The interpretation of Explanation 1 to section 271(1)(c) was crucial in determining whether the addition of the amount constituted concealment. Additionally, the application of section 69A, dealing with unexplained money owned by the assessee, was discussed to establish ownership of the income in question.4. Relevance of Findings in Quantum Proceedings:The judgment emphasized that findings in quantum proceedings should not conclusively determine the question of concealment for penalty imposition. It was reiterated that an independent finding regarding concealment must be made, separate from the quantum proceedings' outcomes.5. Ownership of Income and Imposition of Penalty:The court deliberated on whether the income belonged to the assessee or the partners, highlighting the need for a conclusive determination of ownership for penalty imposition. The existence of two possible views on income ownership necessitated a detailed examination before imposing any penalty.6. Conclusion and Setting Aside of Tribunal Order:After a thorough analysis of the contentions raised and legal interpretations provided, the court concluded that no penalty could be imposed due to the existence of two possible views on income ownership and the lack of conclusive findings regarding concealment. The impugned order of the Tribunal was set aside in favor of the assessee, with no costs awarded to any party.This detailed analysis showcases the intricate legal considerations and interpretations made by the High Court in the given judgment, addressing various issues related to income addition, concealment, ownership determination, and penalty imposition under the Income-tax Act, 1961.