1995 (5) TMI 66 - AT - Income Tax

Tribunal upholds penalty for income concealment due to discrepancies in cash books

The Tribunal found sufficient evidence of income concealment by the assessee, as discrepancies were discovered in duplicate cash books during a search ... Assessing Officer, Assessment Year, Original Assessment, Search And Seizure, Total Income Issues Involved:1. Cancellation of penalty under section 271(1)(c)2. Validity of income estimation and concealment of income3. Legitimacy of documents and evidence presented4. Applicability of previous tribunal decisionsDetailed Analysis:1. Cancellation of Penalty under Section 271(1)(c):The primary issue in this appeal concerns the cancellation of a penalty amounting to Rs. 6,398 imposed on the assessee by the Income-tax Officer (ITO) under section 271(1)(c). The Deputy Commissioner (Appeals) had previously canceled this penalty, which the Revenue is now challenging. The ITO had levied the penalty due to discrepancies found during search and seizure operations, where duplicate cash books and other incriminating documents were discovered. The ITO argued that the penalty was justified as the assessee had filed a return declaring a significantly higher income of Rs. 30,000 after the search, compared to the originally assessed income of Rs. 7,250.2. Validity of Income Estimation and Concealment of Income:The original assessment was completed on 4-10-1982, with a total income of Rs. 7,250. However, after the search and seizure operations on 4-2-1984, the assessee filed a return on 26-5-1984 declaring an income of Rs. 30,000. The ITO computed the taxable income at Rs. 64,690, which was later reduced to Rs. 32,700 by the Appellate Assistant Commissioner. The ITO's assessment was based on discrepancies found in the duplicate cash books, which did not match the original books of account. The ITO added Rs. 8,500 for household expenses to the taxable income. The assessee argued that the income was computed on an 'estimated basis' and that there was no concealment of income. The Deputy Commissioner (Appeals) agreed and canceled the penalty, stating that section 271(1)(c) was not applicable in cases where income was computed on an estimated basis.3. Legitimacy of Documents and Evidence Presented:The Revenue argued that the return filed by the assessee after the search was not voluntary and was only regularized by issuing a notice under section 148. The ITO's assessment was based on the duplicate cash books and other documents seized during the search, which showed discrepancies in the entries. The Deputy Commissioner (Appeals) and the Tribunal had previously confirmed the cancellation of penalties for the assessment years 1979-80 and 1980-81 on similar grounds. The Tribunal noted that the income had been computed on an estimated basis, and there was no evidence of concealment by the assessee. However, the Revenue contended that the present case had ample material to show concealment of income, and the penalty should be restored.4. Applicability of Previous Tribunal Decisions:The Tribunal had earlier confirmed the cancellation of penalties for the assessment years 1979-80 and 1980-81, stating that the income was computed on an estimated basis and there was no evidence of concealment. However, the Revenue argued that the present case was different as there was ample evidence of concealment found during the search and seizure operations. The Tribunal decided to consider the present appeal independently of the previous decisions, noting that the facts of the current case were distinguishable. The Tribunal observed that the assessee had filed a return showing an income of Rs. 30,000 only after the raid, and the final assessed income was Rs. 32,700, which was not an estimate but a valid and acceptable basis for taxable income.Conclusion:The Tribunal concluded that the Department had sufficient evidence to prove concealment of income by the assessee. The assessee had not provided relevant details and maintained duplicate cash books, which were discovered only during the raid. The Tribunal set aside the order of the Deputy Commissioner (Appeals) and restored the penalty order passed by the ITO. The Revenue's appeal was allowed.