TaxTMI 
TaxTMI 
2000 (3) TMI 22
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....act in cancelling the penalty under section 271(1)(c) sustained by the Commissioner of Income-tax (Appeals) ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that the assessee's case falls under clause (B) of Explanation 1 of section 271(1)(c) and so Explanation 1(A) is not applicable to the facts of the case ?" The background facts, as indicated in the statement of case, are as follows : The assessee is a public limited company engaged in the business of manufacturing yarn. For the assessment year 1979-80, it was assessed to tax on a total income of Rs. 21,06,690. In appeal, the Commissioner of Income-tax (Appeals), Calicut (in short, "the CIT(A)"), reduced the total inc....
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....ccount. Accordingly, he made addition of Rs. 2,28,825, which was confirmed in appeal. Penal proceedings under section 271(1)(c) of the Act were initiated on the ground that the assessee had concealed its income by inflating the consumption of raw materials account. In response to the show-cause notice, the assessee explained that there was no inflation in the said account and that two quantities of 2,049.5 kgs. and 650.5 kgs. were actually received from outside parties. The entries in the registers showing receipts from the processing department and the dyeing department were explained to be wrong entries by clerical error. The Assessing Officer without accepting the plea of the assessee, levied penalty of Rs. 1,75,000 under section 271(1)(....
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....g that the explanation offered is bona fide, or that all the facts relating to consumption and materials have been disclosed. In the absence of such a finding, it was submitted, the order of the Tribunal is not sustainable. Learned counsel for the assessee, on the other hand, submitted that on analysing the factual position, the Tribunal had concluded that the explanation offered was not substantiated. But that did not necessarily bring in the concept of concealment and the proviso to Explanation 1(B) is clearly applicable. The finding being factual, no question of law arises. The Tribunal analysed the factual aspects in detail. It was observed that there is no dispute about the assessee having received raw materials from outside parties....
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.... such income, he may direct that such person shall pay by way of penalty,---... (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income : Provided that, if in a case falling under clause (c) the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall not issue any direction for payment by way of....
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....omputation of the total income of the assessee, he furnishes no explanation, or he cannot substantiate the explanation offered by him or the explanation offered by him is found to be false, the relevant income shall be deemed to be his concealed income. If, however, the explanation offered by him is bona fide and all the facts relating to the explanation and material to the computation of the total income have been disclosed by him, Explanation 1 will not be applicable. As is clear from the explanatory notes relating to the amendments by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 (Act 46 of 1986), the inadequacy of the Explanation added by the Finance Act, 1964, led to the subsequent substitution by the 1975 Amendm....