1964 (1) TMI 53 - HC - Income Tax

Summary

Issues:
Assessment of penalty under section 28(1)(c) of the Income-tax Act for failure to disclose the value of closing stock in the accounting years 1945-46 and 1946-47.

Analysis:
The case involved the assessment of penalty under section 28(1)(c) of the Income-tax Act against the assessee, a coal mine proprietor, for not disclosing the value of closing stock in the accounting years 1945-46 and 1946-47. The Income-tax Officer imposed the penalty, alleging deliberate omission by the assessee. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld the penalty, considering it a fit case for its imposition.

Upon the reference to the High Court, it was noted that the Income-tax Appellate Tribunal had not definitively determined the accounting method used by the assessee. After a supplementary statement by the Tribunal, it was found that the assessee employed a hybrid accounting system, making it difficult to ascertain true profits.

The assessee argued that there was no deliberate concealment, citing confusion in maintaining proper accounting records due to the novelty of the business. The High Court emphasized that penalty under section 28(1) is a penal provision, placing the burden on the income-tax department to prove concealment or deliberate furnishing of inaccurate particulars.

Relying on legal precedents, the High Court held that the department failed to establish the assessee's guilt of concealment or furnishing inaccurate particulars. It was concluded that the failure to disclose the closing stock values did not amount to deliberate concealment under section 28(1)(c). Consequently, the penalties imposed for the two accounting years were deemed legally invalid.

The High Court ruled in favor of the assessee, stating that the penalties were unjustified based on the facts and circumstances of the case. The questions of law were answered in favor of the assessee, and no costs were awarded in the reference.