2002 (8) TMI 97 - HC - Income Tax

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty under section 271(1)(c) of the Income-tax Act, 1961 to the extent it was levied by reference to the addition of Rs. 19,000 made in the assessment? - the assessee, in the instant case, has failed to discharge his onus of proof. The aforesaid Explanation was amended by the Taxation Laws (Amendment) Act, 1975, with effect from 1st April, 1976. The amendment was prospective in effect and in the year under reference, the amendment was not in force. Though the penalty proceedings are penal in nature, in the facts of this case, the onus on the Revenue has been duly discharged. - the question involved herein is answered in the negative, i.e., in favour of the Revenue and against the assessee.

Summary

Issues:
1. Justification of cancelling penalty under section 271(1)(c) of the Income-tax Act, 1961 based on addition made in the assessment.

Detailed Analysis:
The High Court of Delhi was approached by the Revenue for its opinion on the cancellation of penalty under section 271(1)(c) of the Income-tax Act, 1961. The Tribunal had levied a penalty on the assessee for discrepancies in the closing stock under section 271(1)(c) of the Act. The addition of Rs. 19,000 was made based on differences in the closing stock shown in inventories seized during a raid and those produced by the assessee. The Tribunal, however, set aside the penalty citing that there was no material to link the discrepancy to the income for the assessment year under appeal. The Tribunal also considered the explanation provided by the assessee, supported by witness statements, as valid, despite being found false. The Revenue contended that the Tribunal erred in its findings as the burden of proof was on the assessee post an amendment to section 271(1)(c) of the Act. The court referred to past judgments to establish the burden of proof on the assessee and the impact of the amendment on penalty proceedings. The court highlighted that the burden of proof shifts to the assessee if the returned income is less than 80% of the total assessed income, as per the Explanation appended to the Act.

2. Interpretation of section 69A of the Income-tax Act, 1961 and its application in penalty proceedings.

The court delved into the interpretation of section 69A of the Income-tax Act, 1961, which deals with unexplained money, bullion, jewellery, or valuable articles. The court referenced past judgments to explain that the burden of proof lies with the assessee to demonstrate that the failure to report correct income was not due to fraud or wilful neglect. The court emphasized that the amendment to the Act in 1964 shifted the burden of proof to the assessee in cases where the returned income is less than 80% of the total assessed income. The court further discussed how the Explanation in the Act creates a presumption of concealment of income unless proven otherwise by the assessee. The court cited cases where the burden of proof was not discharged by the assessee, leading to the imposition of penalties. The court concluded that the Revenue had discharged its onus of proving concealment of income in the case under consideration, based on the principles laid down in past judgments and the provisions of the Act.

In conclusion, the court answered the question in favor of the Revenue and against the assessee, upholding the imposition of the penalty under section 271(1)(c) of the Income-tax Act, 1961.