1977 (2) TMI 12 - HC - Income Tax

Tax Tribunal Rules in Favor of Assessee: No Penalty for Cash Credit Deletion

The Tribunal held that the penalty under section 271(1)(c) was not leviable due to the deletion of cash credits. It also determined that there was no ... Cash Credits Issues:1. Whether the penalty under section 271(1)(c) was leviable in the case.2. Whether there was a clear case of concealment when the additions on account of cash credits were fully deleted.Analysis:The case involved the assessment years 1955-56 and 1956-57 of a registered firm. The Appellate Assistant Commissioner found suspicious cash credits and discrepancies, leading to an enhancement notice. The assessee admitted to suppressed income, claiming it was derived from suppressed profits. The Appellate Assistant Commissioner accepted part of the claim but rejected the rest due to lack of evidence. The Income-tax Officer reopened assessments for both years, adding cash credits and interest, initiating penalty proceedings for concealment.The Inspecting Assistant Commissioner imposed penalties after the assessee admitted the cash credits represented income. The Tribunal, in a common judgment, deleted the additions of cash credits for both years, finding them to be covered by suppressed trading profits. The Tribunal then considered the penalty appeals, questioning if penalties could be levied after the deletions. The Tribunal found the penalties were based on the deleted cash credits, thus unsustainable after deletion.The Inspecting Assistant Commissioner's penalty orders focused solely on the cash credit amounts, making the penalties unsustainable once those amounts were deleted. The Tribunal concluded that penalties could not be sustained based on the deleted cash credits, even though interest on non-genuine loans remained. The Tribunal held that concealment for penalty under section 271(1)(c) requires the concealed income to remain in the final assessment order, which was not the case after the deletions.Therefore, the Tribunal held that the penalty under section 271(1)(c) was not leviable due to the deletion of cash credits. It also determined that there was no clear case of concealment as the additions were fully deleted. The judgment was in favor of the assessee, disposing of the reference without costs. Both judges concurred with the decision.