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Issues Involved:
1. Whether the assessee committed an offence under section 28(1)(c) of the Income-tax Act in the relevant assessment year. 2. The burden of proof in penalty proceedings under section 28(1)(c). 3. The applicability of findings from assessment proceedings to penalty proceedings. Issue-wise Detailed Analysis: 1. Whether the assessee committed an offence under section 28(1)(c) of the Income-tax Act in the relevant assessment year: The Tribunal was tasked with determining if the assessee had committed an offence under section 28(1)(c) concerning its income for the previous year S.Y. 2003, relevant to the assessment year 1948-49. The assessee was assessed on an income of Rs. 15,203, which the Department classified as income from undisclosed sources. The Tribunal's majority held that the assessee had not committed an offence under section 28(1)(c). The explanation provided by the assessee regarding the source of Rs. 15,203 was found to be false, but the Tribunal concluded that this alone did not constitute an offence under section 28(1)(c). The Tribunal reasoned that the Department must establish that the receipt of Rs. 15,203 constituted "income" of the assessee, which was not done. 2. The burden of proof in penalty proceedings under section 28(1)(c): The Tribunal's majority opinion emphasized that penalty proceedings under section 28(1)(c) are penal in nature and should adhere to the elementary principles of criminal jurisprudence, where the burden of proving guilt lies with the prosecution. The Tribunal found no evidence, except the false explanation given by the assessee, to establish that the Rs. 15,203 was taxable income. The dissenting member argued that the false explanation was sufficient to impose a penalty, but the majority disagreed, highlighting that the charge was not about providing a false explanation but about concealing income or furnishing inaccurate particulars. 3. The applicability of findings from assessment proceedings to penalty proceedings: The Tribunal's President noted that the income in question was not earned in the assessment year, leading to the conclusion that penalty proceedings could not be initiated for that year. The Department argued that the assessment finding was final and binding, but the Tribunal held that findings in assessment proceedings do not constitute res judicata in penalty proceedings. Each proceeding under the Income-tax Act is self-contained, and findings in one do not bind another. The Tribunal concluded that the Income-tax Officer in penalty proceedings is not bound by the assessment findings, and it was open to the Tribunal to arrive at a different conclusion. Conclusion: The High Court upheld the Tribunal's decision, agreeing that the Department failed to establish that the Rs. 15,203 constituted the assessee's income. The Court emphasized that the burden of proof in penalty proceedings lies with the Department, and the false explanation alone was insufficient to prove the offence under section 28(1)(c). The Court also affirmed that findings in assessment proceedings do not bind penalty proceedings. The reference was answered in the affirmative, favoring the assessee, and the Commissioner was ordered to pay the costs.
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