COMMISSIONER OF INCOME TAX Vs. LOTUS CONSTRUCTIONS

JUDGEMENT

(1.) THIS case presents an occasion to deal with certain important aspects in the context of initiation of proceedings under Section 271 (c) of the Income Tax Act (for short the Act).

(2.) THE respondent is an assessee involved in the activity of construction. For the assessment year 1995 -1996, the returns were submitted on 30.10.1995 showing an income of Rs.2,40,180/ -. Before the order of assessment was passed, a survey was conducted under Section 143A of the Act on 08.12.1995. One of the aspects noticed during the course of survey was that the respondent submitted an application to the Life Insurance Corporation in the year 1993 for sanction of loan and had projected the income through the activity of construction, at Rs.23.68 lakhs for three financial years between 1993 and 1995. However, the income for three financial years was shown only at Rs.16,03,364/ - in the respective returns. An order of assessment was passed by the Assessing Officer on 15.03.1996 taking the total income at Rs.10,08,200/ -. The same has become final and income tax imposed thereon was paid.

(3.) THE Assessing Officer initiated penalty proceedings under Section 271(c) of the Act against the respondent. On receipt the of show cause notice, the respondent submitted an explanation. It was mentioned that in the course of survey, certain additions were accepted with a view to purchase peace and that in the order of assessment, no mention was made about initiation of proceedings under Section 271 (c) of the Act. The explanation was not accepted and the Assessing Officer passed an order, dated 30.09.1996, imposing penalty of Rs.3,04,000/ -. The respondent carried the matter in an appeal before the Commissioner of Appeals. The appeal was allowed through order, dated 27.01.1997. Aggrieved by that, the Department filed ITA No.620/H/1997, before the Visakhapatnam Bench of the Income Tax Appellate Tribunal. The appeal was dismissed on 10.10.2002. Hence, this further appeal under Section 260 -A of the Act, by the Revenue.