1981 (8) TMI 113 - AT - Income Tax

Summary

Issues:
1. Penalty proceedings under section 271(1)(c) for under valuation of closing stock and alleged theft of cash by driver.
2. Validity of penalty proceedings in relation to the two additions.
3. Assessment of penalty for disallowance of loss of cash.
4. Consideration of original assessed income in penalty proceedings.
5. Application of Explanation under section 271(1)(c) for penalty.

Analysis:

1. The assessee filed a return with an income of Rs. 22,861 for the assessment year 1974-75. The Income Tax Officer (ITO) made two additions - one for under valuation of closing stock and another for alleged theft of cash by the driver. Penalty proceedings under section 271(1)(c) were initiated without clear directions in the assessment order. The Appellate Assistant Commissioner (AAC) confirmed both additions. The ITO levied a penalty for under valuation of closing stock, which was later cancelled by the AAC.

2. The Tribunal set aside the disallowance of the loss of cash and directed further examination. The ITO sustained the addition, leading to penalty proceedings for the disallowed loss. The AAC found that the basis for both penalty notices was the same, as the original assessed income remained unchanged. The AAC quashed the penalty proceedings, stating that the ITO could not start penalty proceedings afresh without a change in assessed income.

3. The AAC held that the disallowance of the loss was not proven to have occurred during business operations. The Tribunal found the loss may not be genuine and was not incurred in the course of business. The AAC invoked the Explanation under section 271(1)(c) and cancelled the penalty, noting that circumstantial evidence did not prove concealment of income.

4. The Department appealed, challenging the AAC's decision. The Tribunal upheld the AAC's order, stating that penalty proceedings could not be initiated afresh on the same material without justification. The Tribunal found no case of concealment of income or inaccurate particulars. The failure to return correct income was not due to fraud or wilful neglect, as the assessee provided all relevant material, even if it fell short of satisfying the authorities.

5. The Department's appeal was dismissed, affirming the AAC's decision to cancel the penalty based on lack of evidence for concealment of income and absence of fraud or wilful neglect in the assessee's actions.