2004 (12) TMI 80 - HC - Income Tax

Imposition of penalty under section 271(1)(c) - applicant had not disclosed the income of Rs. 10, 000 in the original return and has disclosed it only after the search was conducted and reassessment proceeding was initiated. Thus there has been a conscious effort on the part of the applicant to conceal the income. The applicant has not been able to rebut the presumption raised under the Explanation to section 271(1)(c) of the Act which was upon the applicant to prove that there was no gross or wilful neglect on his part. The question of shifting the burden/onus on the Department in the circumstances did not arise. - penalty under section 271(1)(c) was liable to be sustained

Summary

Issues:
- Interpretation of penalty under section 271(1)(c) of the Income-tax Act, 1961

Detailed Analysis:
The case involved a reference from the Income-tax Appellate Tribunal regarding the imposition of a penalty under section 271(1)(c) of the Income-tax Act, 1961. The applicant, an individual, did not maintain accounts and had an original assessment done by the Income-tax Officer for the year 1975-76. A search at the residence of the applicant's father led to the discovery of a black diary with entries related to transactions, including one involving Rs. 10,000 with a person named Lalloo. The applicant later surrendered this amount during reassessment proceedings as he could not produce Lalloo. The penalty was initially set aside by the Appellate Assistant Commissioner but reinstated by the Tribunal upon appeal by the Revenue.

The main contention raised by the applicant's counsel was that the failure to disclose the amount in the return did not result from fraud or wilful neglect. He argued that the Explanation to section 271(1)(c) raised a rebuttable presumption, and the burden was on the Department to prove wilful concealment. The Revenue's standing counsel countered that the applicant's original return did not include the amount, and as per the Explanation, the burden was on the applicant to show no fraud or neglect. The standing counsel cited a relevant apex court decision to support this argument.

The court noted that the applicant had not disclosed the Rs. 10,000 in the original return but admitted it during reassessment after the search. The Explanation to section 271(1)(c) was applicable as the returned income was less than 80% of the assessed income. The court highlighted the impact of the Finance Act, 1964, which shifted the burden to the assessee to prove no fraud or neglect. Previous court decisions were cited to illustrate the evolution of burden of proof in such cases.

Ultimately, the court found that the applicant had consciously concealed the income, failed to rebut the presumption under the Explanation, and did not prove the absence of gross or wilful neglect. The Tribunal's findings were deemed legally sound, and the court ruled in favor of the Revenue, upholding the penalty under section 271(1)(c) against the applicant. No costs were awarded in the judgment.