1980 (11) TMI 81 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Inspecting Assistant Commissioner (IAC) to levy penalties.
2. Validity of penalty levies under Section 271(1)(c) read with Section 274(2) of the Income Tax Act, 1961.
3. Alleged concealment of income by the assessee.
4. Agreement to penalties as part of the settlement with the Commissioner of Income Tax (CIT).

Detailed Analysis:

1. Jurisdiction of the IAC to Levy Penalties:
The assessee's counsel argued that the IAC's orders dated 30th March 1978 were without jurisdiction. He cited the Special Bench of the Tribunal, Cochin Bench's decision in the case of Shri Joseph John vs. The ITO Co. Cir. A-Ward, Ernakulam, which held that the deletion of Section 274(2) of the IT Act from 1st March 1976 ended the IAC's jurisdiction even for cases validly referred to him earlier. The counsel further argued that since the alleged concealed income for each year was below Rs. 25,000, the ITO alone had jurisdiction to levy penalties under the amended law.

2. Validity of Penalty Levies:
The IAC rejected the assessee's contentions and held that the assessee had agreed to bear penalties amounting to 40% of the extra income added as concealed income. The penalties were levied equivalent to the concealed incomes for the assessment years 1971-72, 1972-73, and 1973-74. The assessee appealed against these orders, arguing that there was no concealment of income and that the reassessments were made based on a settlement with the CIT.

3. Alleged Concealment of Income:
The assessee contended that he voluntarily approached the Department for settlement to purchase peace and that the reassessments were based solely on the settlement. He argued that there was no material evidence to show that he concealed his income. The assessee provided details of investments and savings from agricultural income, which were considered by the ITO during the original assessment proceedings. He also pointed out that most of the investments were accounted for in his books of account.

4. Agreement to Penalties as Part of the Settlement:
The Department argued that the minutes of discussions between the assessee and the CIT on 24th May 1975 indicated that penalties would be levied at 40% of the concealed income. The Department contended that the assessee's acceptance of the terms of the settlement implied agreement to the penalties. However, the Tribunal found no clear evidence that the assessee accepted the condition of penalty imposition. The Tribunal noted that the assessments were completed based on the settlement and that there was no finding by the ITO that the assessee concealed his income.

Tribunal's Findings:
The Tribunal concluded that there was no justification for the levy of penalties. It found that the assessments were made solely based on the settlement with the CIT and that there was no material evidence to show that the assessee concealed his income. The Tribunal referred to several judicial decisions, including the Supreme Court's ruling in Anantharan Veerasinghaaiah & Co. vs. CIT, which emphasized that the burden lies on the Revenue to establish that the disputed amounts represent income and that the assessee consciously concealed the particulars of his income.

The Tribunal also noted that the IAC had not recorded any finding that the assessee earned the amounts assessed as income in each of the years under appeal. The Tribunal held that in the absence of such a finding, the levy of penalty could not be justified.

Conclusion:
The Tribunal canceled the penalties and allowed the appeals, holding that there was no material to support the finding that the assessee was guilty of concealment of income or furnishing inaccurate particulars of his income for any of the assessment years under appeal. The Tribunal did not find it necessary to give any finding on the legal points raised by both parties due to the conclusive findings of fact.