1994 (9) TMI 34 - HC - Income Tax

Summary

Issues involved:
The issue involves the cancellation of a penalty under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 1964-65 based on the alleged concealment of income.

Judgment Details:

Assessment of Penalty:
The Income-tax Officer added a sum of Rs. 25,000 as income from undisclosed sources to the assessee's total income for the assessment year 1964-65. The penalty proceedings under section 271(1)(c) were initiated. The Appellate Tribunal accepted the appeal of the assessee against the penalty, citing the inability of the assessee to prove the source of the cash credit as not necessarily indicating fraud or wilful neglect. The Tribunal referenced the Supreme Court's decision in CIT v. Anwar Ali [1970] 76 ITR 696 to support its decision.

Legal Interpretation:
The Explanation to section 271(1)(c) creates a presumption of concealment of income if the total income returned by the assessee is less than the correct income assessed, unless the assessee proves the failure to return correct income did not arise from fraud or wilful neglect. The burden of proof lies on the assessee to rebut this presumption. The Supreme Court in CIT (Addl.) v. Jeevan Lal Sah [1994] 205 ITR 244 clarified that the rule regarding burden of proof in Anwar Ali's case [1970] 76 ITR 696 is no longer valid post the introduction of the Explanation in 1964.

Appellate Tribunal's Error:
The Appellate Tribunal erred in applying the principles of Anwar Ali's case [1970] 76 ITR 696, which is no longer valid law. The Tribunal failed to consider the changed legal landscape post the introduction of the Explanation in 1964. The Tribunal's reliance on Anwar Ali's case was misplaced, as clarified by the Supreme Court in subsequent judgments.

Conclusion:
The High Court concluded that the Tribunal's decision was erroneous as it did not consider the correct legal principles post the introduction of the Explanation in 1964. The Court held in favor of the Revenue, emphasizing the need to apply the updated legal standards outlined by the Supreme Court in recent judgments. The question referred was answered in the negative, and the decision was ordered accordingly, with no costs imposed.