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TMI Blog2011 (7) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... or the two years, total income had been determined at Rs. 86,72,180/- and Rs. 1,19,34,400/-respectively. In appeal CIT(A) allowed part relief and some issues were set aside to the Assessing Officer and in the fresh assessment dated 30.3.1995, the Assessing Officer determined total income at Rs. 60,03,460/- and Rs. 64,31,780/- respectively. Aggrieved by the order of the CIT(A) both the parties filed appeal before the Tribunal who vide consolidated order dated 24.8.2006 confirmed certain additions and the total income was finally assessed at Rs. 22,44,691/-and Rs. 11,47,533/- respectively for the two Assessment Years. The position regarding the additions confirmed in the two years was as under :- S.No. Nature of addition A.Y. 1989-90 A.Y. 1990-91 1. Unaccounted donation Nil Rs. 11,25,000/- 2. Cash deposit in bank Rs. 8,00,000/- Nil 3. Payment to Mr. Mansoor Virani Rs. 10,25,000/- Nil 4. Notings in Diary A/19 & A/20 Rs. 3,95,211/- Nil 5. Donation given Rs. 21,180/- Rs. 6,000/- 6. Miscellaneous expenses Nil Rs. 16,533/- Total Rs. 22,44,691/- Rs. 11,47,533/- 2.1 The Assessing Officer had also initiated penalty proceedings for concealment of income under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the assessee by the ld. Third Member. The assessee had thus attempted to evade income and penalty was leviable. The Assessing Officer accordingly levied the penalty @100% of tax sought to be evaded which came to Rs. 11,56,675/- and Rs. 5,96,880/- respectively for the two years under consideration. 3. The assessee disputed the decision of the Assessing Officer. In appeal, the CIT(A) observed that there was difference of opinion on the issue of addition at every stage right from the Assessing Officer. In fact, in the appeal against fresh assessment CIT(A) had allowed the appeal in favour of the assessee but the additions were confirmed by the Tribunal. On merit of the case, CIT(A) observed that the assessee had explained the nature and source of cash deposits in the bank account. The assessee had also explained the purpose and source of payment to Mr. Mansoor Virani. The notings in the diary were explained either as reimbursement of expenses or money given to trustees for incurring day to day expenses. As for the donations given, these were fully recorded in the books of account. CIT(A) also observed that penalty proceedings were different from assessment proceedings and fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in case tax was found payable in respect of additions made, penalty had to be levied. It was also submitted that the assessee had not accounted transactions which were found only during the course of search and therefore, it was a fit case for levy of penalty. It was accordingly urged that the order of the CIT(A) should be set aside. 5. We have perused the records and considered the rival contentions carefully. The dispute is regarding levy of penalty for concealment of income under section 271(1)(c) of the Act. The assessee is an educational trust registered under section 12A of the Income tax Act. There was a search in case of one of the trustees, during the course of which several incriminating documents were found which among others showed unaccounted transactions by the trust. The trustee also admitted having not accounted part of the donations received by the Trust. In the original assessment completed under section 143(3) of the Act, the total income had been determined at Rs. 86,72,180/- and Rs. 1,19,34,400/- respectively for the two years. The CIT(A) had given part relief and had restored some of the issues to the Assessing Officer and in the fresh assessment total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income. 5.2 In the present case the facts material to the computation of income were unaccounted donations, cash deposits in the bank account, unaccounted payments to Mansoor Virani, unaccounted notings in diaries etc. The assessee had explained that the amount deposited in the bank account represented cash collections from students on account of uniforms, books, notebooks etc. on behalf of suppliers. However, the explanation was not substantiated. There was also no explanation as to why the amounts received were not accounted as there was no material found during search showing that these represented amounts received from students. The payments made to Mr. Mansoor Virani were admittedly unaccounted. The assessee explained that the payments were made from unaccounted donations. It is pertinent to note that on the one hand, the assessee claimed that there were no unaccounted donations, and on the other hand, it was explained that unaccounted payments to Mr. Mansoor Virani were from unaccounted donations. Moreover, there was no addition on account of unaccounted donations in Assessment Year 1989-90 in which the unaccounted payments to Mr. Mansoor Virani were made. The expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions in the second round of appeal on the ground that the assessee was entitled to exemption under section 10(22) and not on merit. Therefore, it cannot be said that the merit of additions was debatable. The debatable issue was only in relation to allowability of exemption to the assessee under section 10(22) of the Act which will affect the tax liability of the assessee and not in relation to concealment of particulars of income. There are two stages in the process of levy of penalty under section 271(1)(c). The first stage requires determination of income in respect of which particulars have been concealed or inaccurate particulars have been filed. The second stage is the computation of penalty which is based on tax sought to be evaded in relation to such income. Once there is concealment of income, penalty under section 271(1)(c) is leviable. But actual levy of penalty will depend upon the tax payable in relation to concealed income as quantum of penalty is based on tax sought to be evaded. It is possible that in a given situation though there is concealment of income, no penalty is leviable due to the concealed income being covered by some exemption provisions and tax liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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