2001 (10) TMI 1186 - AT - Income Tax

Tribunal cancels penalties under section 271(1)(c) of Income Tax Act, emphasizing need for evidence.

Suresh N. Shah Versus Assistant Commissioner

Suresh N. Shah Versus Assistant Commissioner - TMI Issues Involved:1. Levy of penalty under section 271(1)(c) of the Income Tax Act for the assessment years 1989-90, 1990-91, and 1991-92.Detailed Analysis:Assessment Year 1989-90:The primary issue was the levy of penalty under section 271(1)(c) for furnishing inaccurate particulars of income. The assessee, a share broker, filed a return declaring an income of Rs. 20,53,680 based on a brokerage rate of 0.75%, as previously accepted by the department. However, the Assessing Officer (AO) determined the income at Rs. 31,56,125 by applying a brokerage rate of 1.25%, based on the assessee's admission during a search under section 132(4). The AO imposed a penalty of Rs. 5,50,000, which was upheld by the Commissioner (Appeals), who noted that the assessee failed to appeal against the addition, indicating no grievance against the assessment.The Tribunal, however, observed that the income was assessed on an estimated basis and the department could not find any material evidence during the search indicating concealment of income. The Tribunal held that the mere fact that the AO estimated a higher income does not automatically warrant the imposition of penalty. The Tribunal cited various court decisions, including CIT v. Devandas Perumal & Co. and CIT v. Kiran & Co., which emphasized that penalty cannot be imposed merely because the income was estimated higher. Consequently, the Tribunal deleted the penalty.Assessment Year 1990-91:The issue was similar, involving a penalty under section 271(1)(c) for concealed income. During a search on 27-9-1990, the assessee admitted to earning unaccounted income and declared Rs. 18 lakhs, which was included in the return filed on 29-11-1990. The AO imposed a penalty, which was confirmed by the Commissioner (Appeals), citing the deeming provisions of Explanation 5 of section 271(1)(c).The Tribunal noted that the assessee was not maintaining regular books of account and disclosed income based on bank transactions, a method accepted by the department in the past. The Tribunal held that there was no concealment as the income was declared in the return filed after the search. The Tribunal also noted that the department did not find any additional evidence of concealment during the search. Therefore, the Tribunal deleted the penalty, emphasizing that the provisions of Explanation 5 were not applicable as the income was declared voluntarily and included in the return.Assessment Year 1991-92:The issue again involved a penalty under section 271(1)(c) for concealed income. The assessee declared Rs. 18 lakhs during the search on 27-9-1990 and included this amount in the return filed on 30-10-1991. The AO imposed a penalty, which was confirmed by the Commissioner (Appeals) based on Explanation 5 of section 271(1)(c).The Tribunal reiterated its findings from the previous years, noting that the assessee declared the income voluntarily and included it in the return filed after the search. The Tribunal emphasized that the department did not find any additional evidence of concealment during the search. The Tribunal held that the provisions of Explanation 5 were not applicable as the income was declared voluntarily, specifying the manner in which it was derived, and taxes were paid. Consequently, the Tribunal deleted the penalty.Conclusion:The Tribunal allowed the appeals for all three assessment years, deleting the penalties imposed under section 271(1)(c) of the Income Tax Act. The Tribunal emphasized that penalties cannot be imposed merely on the basis of estimated income and that the department failed to provide independent evidence of concealment.