1995 (8) TMI 53 - HC - Income Tax

Summary

Issues:
1. Whether the assessee has discharged its onus under Explanation to section 271(1)(c) of the Income-tax Act.
2. Whether penalty is exigible under section 271(1)(c) of the Income-tax Act, 1961 based on the facts and circumstances of the case.
3. Whether the Tribunal was justified in deciding the appeal without considering the applicability of Explanation to section 271(1)(c) to the assessee's case.

Analysis:
The judgment delivered by the High Court of Allahabad pertains to a case where the Income-tax Appellate Tribunal referred certain questions for the court's opinion regarding the application of section 271(1)(c) of the Income-tax Act, 1961. The case involved the assessment year 1969-70, where the assessee initially declared an income of Rs. 18,139, but the income was finally determined to be Rs. 55,767, resulting in a penalty of Rs. 38,000 imposed by the Inspecting Assistant Commissioner under the Explanation to section 271(1)(c) of the Act. The Tribunal allowed the assessee's appeal, stating that the Revenue failed to disprove the assessee's case and establish by material on record that the addition as sustained is the assessee's income from concealed sources.

The Explanation to section 271(1)(c) of the Act states that if the total income returned by a person is less than 80% of the correct income assessed, the person shall be deemed to have concealed income unless it is proved that the failure to return the correct income did not arise from fraud or neglect. The Revenue relied on Supreme Court judgments to shift the burden of proof to the assessee in such cases. However, the High Court observed that the Tribunal did not discuss the effect or applicability of the Explanation in its order, despite its prima facie applicability due to the income discrepancy.

The court noted that the Tribunal wrongly placed the burden of proof on the Revenue without determining the applicability of the Explanation to the case. The court referred to precedents and held that the Tribunal's order was not legally justified. Consequently, the court set aside the Tribunal's order and directed it to redecide the appeal considering the applicability of the Explanation to section 271(1)(c) of the Act to the assessee's case. As a result, the court found questions 1 and 2 redundant and did not address them. The parties were directed to bear their own costs in the reference.