1995 (5) TMI 86 - AT - Income Tax

Tribunal cancels penalty under sec 271(1)(c) for assessee's disclosure during search.

The Tribunal upheld the CIT (Appeals)'s decision to cancel the penalty imposed by the Assessing Officer under section 271(1)(c) based on the second ... Assessing Officer, Notice Of Penalty, Penalty For Concealment Issues Involved:The issues involved in the judgment are the cancellation of penalty levied by the Assessing Officer under section 271(1)(c) and the applicability of Explanation 5 to section 271(1)(c) in light of the amendments made by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986.Cancellation of Penalty by CIT (Appeals):The CIT (Appeals) cancelled the penalty levied by the Assessing Officer under section 271(1)(c) based on the second exception contained in Explanation 5. The CIT (Appeals) held that the amendment effective from 10-9-1986, providing two exceptions to Explanation 5, was applicable in the case. The CIT (Appeals) noted that the assessee disclosed the concealed income during the search proceedings and the cash seized was adjusted against tax and interest, indicating compliance with the second exception. The CIT (Appeals) relied on legal principles to interpret the legislative intent behind the amendment, giving a beneficial interpretation in favor of the assessee.Assessee's Arguments and Evidence:The assessee's counsel argued that the penalty notice did not indicate the invoking of Explanation 5 to section 271(1)(c), leading to confusion for the assessee. The counsel contended that the return of income was accepted by the Assessing Officer without any concealment, as the investments found during the search were covered by the income declared in the return. The counsel emphasized that the department prepared the cash flow statement to cover the investments surfaced during the search, which was accepted by the assessee. The absence of regular books of account and the acceptance of the income returned further supported the argument against concealment.Tribunal's Decision and Conclusion:The Tribunal upheld the CIT (Appeals)'s decision to cancel the penalty imposed by the Assessing Officer. The Tribunal agreed with the interpretation of the legislative intent behind the amendment to Explanation 5, providing relief to the assessee. The Tribunal found that the second exception, applicable before the penalty was levied, should benefit the assessee. The Tribunal distinguished previous case laws cited by the Departmental Representative and supported the reasoning and conclusion of the CIT (Appeals). Consequently, the Tribunal dismissed the appeal, affirming the cancellation of the penalty.This comprehensive summary outlines the key issues, arguments, evidence, and the final decision of the Tribunal regarding the cancellation of the penalty under section 271(1)(c) in light of the relevant legal provisions and amendments.