1999 (12) TMI 35 - HC - Income Tax

Summary

Issues Involved:
1. Liability of the assessee to penalty u/s 271(1)(c).
2. Tribunal's cancellation of the penalty.
3. Tribunal's reliance on the second return as a revised return.
4. Burden of proof on the Revenue.
5. Assessee's discharge of burden regarding concealment of income.
6. Tribunal's consideration of additional grounds of 'understanding/misunderstanding'.
7. Tribunal's findings on purchase rates.

Summary:

1. Liability of the Assessee to Penalty u/s 271(1)(c):
The Tribunal held that the assessee is not liable to a penalty u/s 271(1)(c). The Revenue argued that the Tribunal did not consider the factual position and proceeded on unacceptable materials. The Tribunal's conclusion that there was no concealment was based on the assessee's explanation, which was not plausible.

2. Tribunal's Cancellation of the Penalty:
The Tribunal cancelled the penalty imposed by the Income-tax Officer, which was confirmed by the CIT(A). The Tribunal accepted the assessee's explanation that the inflated purchase price was an adjustment to correct the financial loss of the seller, a proprietary concern of the assessee's wife. The Tribunal's conclusion was found to be contrary to the materials on record, including the assessee's own admissions.

3. Tribunal's Reliance on the Second Return as a Revised Return:
The Tribunal relied on the second return filed by the assessee as a revised return. However, the court noted that the return filed on August 3, 1979, after the completion of the assessment, cannot be legally termed as a revised return. The return filed on October 27, 1979, after the initiation of proceedings u/s 147(a), was the valid return considered by the Assessing Officer.

4. Burden of Proof on the Revenue:
The Tribunal cast the burden of proof on the Revenue. The court clarified that the initial burden of proving no concealment lies on the assessee. The Tribunal's approach was found to be erroneous as it did not consider the true import of section 271(1)(c) and the legislative history of the provision.

5. Assessee's Discharge of Burden Regarding Concealment of Income:
The assessee admitted to inflating the purchase price and keeping the amount as cash, which was later introduced into the books of account. The Tribunal's finding that the amount was paid to the seller was contrary to the materials on record. The court held that the assessee did not discharge the burden of proving no concealment.

6. Tribunal's Consideration of Additional Grounds of 'Understanding/Misunderstanding':
The Tribunal considered the assessee's claim of an understanding with the Revenue authorities that no penalty would be imposed if the assessee cooperated in the reassessment proceedings. The court found no specific plea of such an agreement before the Assessing Officer or the CIT(A). The Tribunal's reliance on this ground was found to be unjustified.

7. Tribunal's Findings on Purchase Rates:
The Tribunal held that the purchases were made at rates higher than the market rates. The court found this conclusion to be inconsistent with the assessee's own admissions and the materials on record. The Tribunal's findings were based on surmises and conjectures, making the cancellation of the penalty indefensible.

Conclusion:
The court answered the reference in favor of the Revenue and against the assessee, holding that the Tribunal's cancellation of the penalty was not sustainable.