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Issues involved:
The Tribunal's cancellation of penalties imposed by the Inspecting Assistant Commissioner u/s 271(1)(c) of the Income-tax Act, 1961 for the assessment years 1969-70 and 1970-71. Summary: Assessment Year 1969-70: The assessee, a wine contractor, declared a loss of Rs. 8,410 in his income tax return. Upon a search at his premises, cash and account books were seized. The Assessing Officer initiated penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars. The Tribunal, in its order, noted that the assessee revised his balance sheet, raised cash balance, and filed revised returns with the Department. The Tribunal found that the assessee had discharged the onus as per the Explanation to section 271(1)(c) and that the disputed amounts might not have constituted the assessee's income. The Tribunal concluded that the penalty was not exigible, considering the probabilities presented by the assessee. Assessment Year 1970-71: For this year, the assessee filed a return declaring income of Rs. 11,451. Similar to the previous year, penalty proceedings u/s 271(1)(c) were initiated by the Assessing Officer. The Tribunal, in its order, highlighted that the assessee had offered an explanation for the revised higher income, stating it was to avoid litigation. Citing a Supreme Court case, the Tribunal emphasized that penalty cannot be imposed solely based on subsequently declared higher income. The Tribunal found the explanation satisfactory and held that the burden had been discharged by the assessee. Conclusion: The High Court, after considering the Tribunal's findings and the relevant legal precedent, ruled in favor of the assessee, stating that the Tribunal's decision was not perverse. The Court referred to a Supreme Court judgment emphasizing that penalties cannot be imposed solely based on revised higher income declarations. Consequently, the question of law was answered against the Revenue and in favor of the assessee.
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