Partial relief granted in penalty appeal under section 271(1)(c) for AY 1990-91; specific additions upheld.

The ITAT Mumbai partially allowed the appeal challenging the penalty imposed under section 271(1)(c) of the Act for the assessment year 1990-91. The Tribunal upheld the penalty on specific additions due to the assessee's failure to substantiate explanations, while granting relief on the penalty for a payment to Darashaw & Co. The AO was directed to recompute the penalty accordingly, confirming the penalty on other specified additions.

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Issues:
Challenge to correctness of order for assessment year 1990-91, Levy of penalty u/s. 271(1)(c) of the Act at Rs. 14,25,654.

Analysis:
The Appellate Tribunal ITAT Mumbai heard the appeal challenging the order of Ld. CIT(A)-40, Mumbai for the assessment year 1990-91, specifically regarding the levy of penalty u/s. 271(1)(c) of the Act amounting to Rs. 14,25,654. The case involved a search and seizure action u/s. 132 of the Act in 1990, with subsequent assessment and appeals. The ITAT directed the Ld. CIT(A) to reconsider the grounds, leading to confirmed additions accepted by the assessee. The penalty proceedings u/s. 271(1)(c) were initiated based on inaccurate particulars of income and concealment. The AO sought explanations regarding the additions, and after due consideration, levied the penalty, which was upheld by the Ld. CIT(A).

The main contention of the assessee was that the penalty should not be levied merely because no further appeal was preferred against the quantum addition. The legal argument presented was that penal proceedings differ from assessment proceedings. The provisions of Sec. 271(1)(c) r.w. Explanation-1(A&B) were analyzed, emphasizing on failure to offer explanations or offering false explanations. The Tribunal scrutinized each addition separately to determine the justification for the penalty.

Regarding the payment to Shri Rajendraprasad Jain of Rs. 15,00,000, the Tribunal found the explanation provided by the assessee insufficient to establish the genuineness of the transaction. The lack of substantiating evidence led to the confirmation of the penalty on this disallowance. Similarly, the payment of sub-brokerage to Shri N.N. Rana for Rs. 1,02,100 lacked proper documentation and failed to prove the genuineness of the transaction, justifying the penalty imposition.

However, the disallowance of Rs. 50,000 to Darashaw & Co. was considered purely on technical accounting grounds and not deemed fit for penalty imposition. Lastly, the payment of Rs. 9,88,000 to American Express/M/s. Relan & Co. was also found unsubstantiated, leading to the confirmation of the penalty on this disallowance. The Tribunal upheld the penalty on the specified additions due to the assessee's failure to substantiate explanations, as per Explanation 1B of sec 271(1)(c) of the Act.

In conclusion, the appeal was partly allowed, granting relief on the penalty for payment to Darashaw & Co. The AO was directed to recompute the penalty accordingly, affirming the penalty on other specified additions.

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