Appeal Dismissed Due to Lack of Evidence of Concealment

The appeal I.T.A. No. 54/Chandi of 1992 was withdrawn with no objection, leading to its dismissal. Regarding the penalty under section 271(1)(c) for unexplained investments, the Accountant Member directed the deletion of the penalty as there was no evidence of concealment. The Judicial Member, however, upheld the penalty for the unexplained investment of Rs. 14,600. The matter was referred to a Third Member, who concluded that the penalty for the unexplained investment should be deleted, in line with the Accountant Member's view. The case was remanded for further proceedings based on the majority opinion.

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Issues Involved:
1. Withdrawal of Appeal I.T.A. No. 54/Chandi of 1992.
2. Penalty u/s 271(1)(c) for unexplained investments.

Summary:

1. Withdrawal of Appeal I.T.A. No. 54/Chandi of 1992:
The learned representative of the assessee sought permission to withdraw the appeal I.T.A. No. 54/Chandi of 1992. The learned Departmental Representative had no objection, and accordingly, the appeal was dismissed as withdrawn.

2. Penalty u/s 271(1)(c) for Unexplained Investments:
The assessee's appeal I.T.A. No. 553/Chandi of 1993 was directed against the order of the Commissioner of Income-tax (Appeals) confirming a penalty of Rs. 20,910 imposed by the Assessing Officer u/s 271(1)(c). During a search and seizure operation, the assessee was found to have made investments of Rs. 25,651 in Flame Agencies and Rs. 14,600 in a VCR. The Assessing Officer initiated penalty proceedings and imposed a penalty of Rs. 17,500, which was set aside by the Commissioner of Income-tax (Appeals) for procedural reasons. After obtaining the necessary approval, the Assessing Officer re-imposed a penalty of Rs. 20,910, which was confirmed by the Commissioner of Income-tax (Appeals).

The Tribunal had previously deleted the addition of Rs. 25,651 but confirmed the addition of Rs. 14,600. The learned counsel for the assessee argued that the penalty was levied without invoking the Explanation to section 271(1)(c) and that the onus was on the Revenue to prove concealment of income. The Tribunal, in its previous order, had sustained the addition of Rs. 14,600 due to the unexplained presence of a customs receipt found at the assessee's residence.

The Accountant Member opined that since the penalty was imposed without invoking the Explanation to section 271(1)(c), the onus lay on the Department to prove concealment, and there was no material evidence of concealment. Therefore, he directed the deletion of the penalty.

Judicial Member's Separate Judgment:
The Judicial Member disagreed, stating that the assessee failed to discharge the onus of explaining the investment in the VCR, and thus, the penalty was justified. He directed the deletion of the penalty related to the addition of Rs. 25,651 but confirmed the penalty for the unexplained investment of Rs. 14,600.

Order of Reference to Third Member:
Due to the difference of opinion, the matter was referred to a Third Member, who concluded that the Explanation 1 to section 271(1)(c) could be invoked even if not initially applied by the Assessing Officer. The Third Member held that the failure to satisfactorily explain the customs receipt did not amount to falsehood under Explanation 1. Consequently, the penalty for the unexplained investment of Rs. 14,600 was directed to be deleted, confirming the view of the Accountant Member.

The case was remanded to the Division Bench for passing an order in accordance with the majority opinion.

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