2002 (8) TMI 8 - HC - Income Tax

Penalty u/s 271(1)(c) concealment of income - assessee had made payment on certain dates when no sufficient cash was available with the assessee - The explanation of the assessee that it had borrowed certain funds and instructed the accountant to pass the necessary credit entries in its books of account remains a bald averment in the absence of the details - Tribunal, have come to the conclusion that the assessee has failed to discharge the onus which lay on it no infirmity can be found - there are no facts which would prima facie go to show that the assessee deserves a second innings - Tribunal was right in law in upholding the penalty

Summary

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

Analysis:
The High Court of Gujarat was presented with a case involving the upholding of a penalty under section 271(1)(c) of the Income-tax Act, 1961. The case revolved around an assessment year of 1975-76, where the applicant-assessee, a partnership firm, was under scrutiny for payments made without sufficient cash balance. The Income-tax Officer added a sum of Rs. 64,280 as income from undisclosed sources, which was later confirmed by the Tribunal. Subsequently, a penalty of Rs. 43,000 was levied under section 271(1)(c) of the Act, a decision that was challenged by the assessee.

The assessee contended that the penalty was wrongly imposed, citing reasons such as reliance on an accountant who failed to document borrowings, strained relations with the accountant during assessment proceedings, and inability to recall lenders' names due to the passage of time. The assessee also argued that the incorrect provision of law was applied, urging for a remand to the Tribunal for reevaluation based on the applicable Explanation.

On the other hand, the Revenue argued that the Tribunal's findings were factual and legally sound, emphasizing the assessee's failure to discharge the burden of proof and provide a plausible explanation supported by material evidence. The Revenue highlighted that the assessee's explanation lacked essential details regarding borrowings, lenders, and repayment terms, casting doubt on its credibility.

The High Court acknowledged the applicability of the Explanation existing up to March 31, 1976, and deliberated on the burden of proof on the assessee to rebut the presumption of concealment of income. Citing precedents, the Court emphasized the necessity of a credible and acceptable explanation from the assessee to counter the statutory presumption.

Ultimately, the Court found that the assessee failed to substantiate its claims, as crucial details were missing, and the provided explanation lacked credibility. The Court declined to remand the matter to the Tribunal, as the foundational facts for a second review were absent. Consequently, the Court upheld the penalty under section 271(1)(c) in favor of the Revenue, emphasizing the importance of credible explanations and burden of proof in tax penalty cases.