2004 (7) TMI 58

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....he Income-tax Act, 1961, as applicable with effect from April 1,1976, and thereby upholding the imposition of the penalty of Rs. 13,000 on the assessee under section 271(1)(c)?" For the year 1975-76, the assessee filed its return of income on February 10, 1978, declaring a total income of Rs. 1,76,130. The Income-tax Officer, however, framed the assessment on a total income of Rs. 2,24,130 under section 143(3) of the Act, on March 31,1978. One of the components of the total income determined by the Income-tax Officer was Rs. 13,000 which was included in the total income of the assessee in the following manner: "On scrutiny of cash book, the following deposits were found: Rs. 5,000 Smt. Rani Gupta 2,000 Smt. Sheela Rani ....

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....sessment year under consideration. In this connection, he referred to the relevant provisions of the Explanation to section 271(1)(c) of the Act, which were made applicable with effect from April 1, 1976 and submitted that the test applied by the Commissioner of Income-tax (Appeals) in confirming the penalty imposed by the Income-tax Officer was not at all relevant. It was submitted that in view of the proviso to Explanation 1 to section 271(1)(c) of the Act, as it stood for the year under consideration, no penalty could have been imposed in respect of the addition of Rs. 13,000 made in the assessment. Relying on the decision of the hon'ble Gauhati High Court in the case of CIT v. Assam Travels Shipping Service [1977] 110 ITR 359, it was al....

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....se of Guduthur Bros. v. ITO [1960] 40 ITR 298, the learned representative for the Department submitted that just because certain wrong provisions of the Act were applied by the income-tax authorities, the penalty proceedings could not become bad in law so as to deserve to be cancelled. He, therefore, urged that in the instant case, the appeal is required to be decided on the basis of the provisions of the Act as applicable in the instant case. Thereafter, he referred to the proviso to Explanation 1 to section 271(1)(c) of the Act and submitted that since the assessee had not given any explanation in respect of the addition of Rs. 13,000 made in the assessment, the assessee was not entitled to get the benefit of the said proviso. In this con....

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.... the alternative submissions made on behalf of the assessee, namely, that since it had filed the return of income on February 10, 1978, the provisions as they stood on that day could be applicable, in view of the decision of the hon'ble Supreme Court in the case of Brij Mohan [1979] 120 ITR 1. It, therefore, directed the Income-tax Officer to recompute the quantum of penalty imposable under section 271(1)(c) of the Act with reference to the tax sought to be evaded by the assessee. We have heard Sri Vikram Gulati, learned counsel for the applicant and Shri A. N. Mahajan, learned counsel appearing for the Revenue. Shri Gulati submitted that the Tribunal did not apply Explanation 1 to section 271(1)(c) of the Act as it stood on April 1, 197....