1994 (7) TMI 41 - HC - Income Tax

Summary

Issues involved:
The judgment involves the question of whether the Income-tax Appellate Tribunal was justified in upholding the levy of penalty on the basis of low withdrawals for household expenses added as income on an estimate.

Details of the Judgment:

Assessment of Household Expenses:
The assessee had shown withdrawals of Rs. 11,439 for household expenses, which the Income-tax Officer deemed low. An addition was made based on estimates, including expenses for school fees, tutors, messing expenses, miscellaneous expenses, milk expenses, and other items, totaling Rs. 35,261. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld additions of Rs. 24,741 and Rs. 14,061, respectively.

Penalty Proceedings u/s 271(1)(c):
The Income-tax Officer initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars. A penalty of Rs. 7,000 was imposed, which the Appellate Assistant Commissioner upheld, finding that the assessee furnished inaccurate particulars consciously. The Tribunal also upheld the penalty, noting the failure of the assessee to substantiate his living expenses within the declared amount.

Interpretation of Section 271(1)(c):
The court analyzed section 271(1)(c) which imposes a penalty for concealing income or furnishing inaccurate particulars. The clause does not require "deliberately," but still contemplates mens rea. Penalty cannot be levied solely on estimates; however, if a detailed enquiry is conducted, and the assessee fails to rebut the evidence, penalty may be justified. The burden is on the assessee to prove no gross neglect. In this case, the assessee failed to discharge this burden or provide any new evidence, leading to the presumption of concealment.

Conclusion:
The court upheld the Income-tax Appellate Tribunal's decision to levy the penalty based on the addition of low withdrawals for household expenses. The Tribunal was deemed justified in upholding the penalty, as the assessee failed to provide sufficient evidence or explanation to avoid penal consequences. The reference was answered in favor of the Revenue and against the assessee.