2002 (10) TMI 71 - HC - Income Tax

Court cancels penalty under Income-tax Act citing inadequate evaluation of assessee's explanation

The High Court of Madras canceled the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 1982-83. The penalty was ... 'Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in cancelling the penalty levied under section 271(1)(c) of the Income-tax Act, 1961?' - Section 271(1)(c) of the Income-tax Act, 1961, in its Explanation refers to the explanation offered by the person being found to be false or not being one which the person offering the explanation is able to substantiate. The consideration of the explanation offered is, therefore, a duty cast upon the officer imposing penalty. In the absence of such consideration and the finding that the explanation is false or that the assessee had failed to substantiate the explanation offered, the officer cannot proceed to hold that there has been concealment of income attracting levy of penalty. - The question referred is therefore answered in favour of the assessee and against the Revenue. The High Court of Madras canceled the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 1982-83. The penalty was imposed based on unreported jewellery found during a raid, but the explanation provided by the assessee was not considered. The Commissioner and Tribunal both ruled in favor of the assessee, stating that without proper consideration of the explanation, penalty for concealment of income cannot be imposed.