2002 (11) TMI 792 - AT - Income Tax

Partial success in penalties appeal for 1980-81 and 1982-83 assessments. Loans supported by documentation.

Kumar Agencies (India) Versus Assistant Commissioner of Income-Tax

The appeals regarding the levy of penalties under section 271(1)(c) for the assessment years 1980-81 and 1982-83 were partially allowed. The penalty for ... - Issues Involved:1. Levy of penalty under section 271(1)(c) for assessment years 1980-81 and 1982-83.2. Validity of the penalty orders concerning procedural fairness and limitation of time.3. Justification of penalties based on the assessee's explanation and the evidence provided.Issue-wise Detailed Analysis:1. Levy of Penalty under Section 271(1)(c):The assessee appealed against the levy of penalty under section 271(1)(c) for the assessment years 1980-81 and 1982-83. The penalty was imposed due to the denial of loans by four cash creditors during a search under section 132. The Tribunal initially accepted the assessee's contention that the additional income was disclosed mainly to buy peace, except for the four creditors who denied the loans. The Tribunal remitted the matter back to the Assessing Officer to redecide the issue after giving the assessee an opportunity to cross-examine the creditors.2. Validity of Penalty Orders:The assessee argued that the penalty orders were barred by limitation under section 275(1)(a). The Tribunal held that the limitation of time applies to the original penalty order and not to orders made afresh by an appellate authority. Thus, the penalty orders made on March 31, 1992, were not barred by limitation.3. Justification of Penalties:The assessee contended that the penalties were unjustified as the loans were genuine, supported by confirmations, and transactions were through bank accounts. The Tribunal found that the assessee failed to avail the opportunity to cross-examine the creditors, thus justifying the penalty. However, the penalty for the assessment year 1980-81 was reduced to the minimum prescribed rate, while the penalty for 1982-83 was upheld at the minimum rate.Separate Judgments Delivered:The Judicial Member disagreed with the conclusions of the Accountant Member, emphasizing that the assessee was not given adequate opportunity to rebut the statements of the creditors. The Judicial Member held that the penalties were not justified as the loans were through account payee cheques, and the confirmations were filed. The Judicial Member also noted that the suspicion of non-genuine loans was not sufficient to uphold the penalty.Order of Third Member:The Third Member agreed with the Judicial Member, stating that the addition was made based on the assessee's declaration to buy peace and avoid litigation. The Third Member emphasized that the conditions for invoking Explanation 1 to section 271(1)(c) were not met, as the Assessing Officer did not record a finding that the explanation was false and the bona fide was not proved.Conclusion:The appeals for the assessment year 1980-81 were partly allowed, reducing the penalty to the minimum rate, while the appeal for 1982-83 was dismissed. The Third Member's opinion aligned with the Judicial Member, concluding that the penalties were not justified based on the evidence and circumstances.