- (1.) AS common facts on issues are involved in these four appeals, the same were argued together by the common authorised representative of the assessee and the Departmental Representative. The same are being decided by this consolidated order for convenience.
(2.) These four are cross-appeals filed by the assessees as well as Revenue in relation to levy of penalty under Section 271(1)(c) for asst. yr. 1988-89 in the case of two assessees. Facts of the case leading to these appeals as mentioned in the penalty orders and the impugned appellate orders of the learned CIT(A), briefly, are that these two ladies were connected with one Shri Harshad S. Mehta. There was a search under Section 132 of the Act on 27th Sept., 1990. During the course of the search, Shri Harshad Mehta made a statement that in the absence of updated books of account, the source of investment in various assets might not be properly known to them and, therefore, the members of the family made a declaration of additional income of Rs. 3 crores under Section 132(4) of the IT Act, 1961. It was promised that a detailed break-up of the amount would be given to the Department in a few days time. It was further stated that all the members of the family had earned additional income of Rs. 3 crores out of brokerage of stock exchange and capital gains from investment in shares and securities which had not been accounted for in the family members personal books of account. On the date of search, the members of family had not filed returns of income for asst. yrs. 1988-89, 1989-90 and 1990-91. Shri Harshad Mehta further stated that they proposed to pay taxes on additional income of Rs. 25 lakhs for asst. yr. 1989-90 and Rs. 1 crore for asst. yr. 1990-91 and that the Department should take a lenient view and grant them immunity from penalty and prosecution and interest. Thereafter, on 10th May, 1991, Shri Harshad S. Mehta and Shri Ashwin S. Mehta jointly submitted a letter to the AO wherein the fact of declaration of additional income under Section 132(4) to the extent of Rs. 4.25 crores was reiterated. Besides, the family members filed separate affidavits on 15th May, 1991, inter alia, stating that they had made declaration under Section 132(4) declaring total income of Rs. 4,25 crores as source of investment in shares found could not be explained. According to the AO, these two ladies vide their letters dt. 22nd Jan., 1991, submitted the break-up of declaration for earlier years in the following manner : JUDGEMENT_11549_TLIT0_20010.htm
(3.) AS these assessees had not famished return of income, the AO issued notices under Section 148 on 7th Nov., 1990. In response, Smt. Rasila S. Mehta filed her return of income on 30th Nov., 1990, declaring total income at Rs. 38,751. Smt. Pratima H. Mehta filed her return of income on 30th Nov., 1990, declaring total income of Rs. 53,010. AS these returns of income were not accompanied by the P&L a/c and balance sheet, the same were eventually treated as invalid returns which was communicated to these assessees on 8th April, 1991. Subsequently, these assessees filed returns of income on 4th June, 1991, declaring total income of Rs. 39,500 and Rs. 53,010. The asessments in their cases were completed on 26th March, 1993, at total income of Rs. 1,52,496 in the case of Smt. Rasila S. Mehta and Rs. 18,20,077 in the case of Smt. Pratima H. Mehta. However, in pursuance of the order of the learned CIT(A), the total income in their cases were revised to Rs, 45,436 and Rs. 53,010 respectively. During the course of assessment proceedings the AO had initiated penalty proceedings under Section 271(1)(c). In this connection, the assessee made their submissions to the AO. Smt. Pratima H. Mehta pointed out that as per order of the Hon'ble Judge of the Special Court, Shri S.N. Variava, in miscellaneous application No. 107 of 1993 dt. 2nd July, 1993, no penalty should be imposed against her. The AO however, held that the said order related to levy of penalty under Section 221 only and not other provisions of the IT Act.;