1990 (7) TMI 137 - AT - Income Tax

Summary

Issues:
1. Levy of penalty for concealment of income.

Analysis:
The case involves the levy of a penalty for concealing income related to minors who are beneficiaries under certain trusts. The assessee, who is the father of the minors, did not initially declare the minors' income from the trust in the original return. The Income Tax Officer (ITO) issued a show-cause notice regarding the concealment of income. The assessee's explanations were based on the Supreme Court decision in CIT vs. Anwar Ali and the Gujarat High Court decision in Addl. CIT vs. I.M. Patel & Co. However, the ITO rejected the explanations, leading to the imposition of a penalty of Rs. 1,17,650. The Commissioner upheld the ITO's decision.

The Tribunal considered the arguments presented by the assessee's advocate, emphasizing the lack of Mens rea on the part of the assessee. Detailed financial information was provided to support this claim. The counsel also argued that the penalty was excessively high, presenting alternative calculations to demonstrate this point. On the other hand, the Departmental Representative contended that the penalty was justified to ensure accurate returns were filed, as the minors' income should have been included as per section 64. The representative highlighted that the revised return was filed only after the ITO's intervention, indicating non-disclosure in the original return.

The Tribunal found no justification for the penalty imposition, noting that the tax paid by the trust exceeded the tax the assessee would have had to pay by including the minors' income. The Tribunal criticized the ITO's basis for imposing the penalty solely on the non-inclusion of the minors' income in the original return. Additionally, the Tribunal discussed the High Court's interpretation of penal liability under section 271, emphasizing the importance of filing correct returns regardless of actual tax liability.

Ultimately, the Tribunal concluded that while the legislative intent to ensure accurate income disclosure must be respected, penalizing the assessee in a refund case for not filling a specific column would be overly strict. As a result, the penalty imposed was canceled, and the appeal was allowed.