1993 (2) TMI 66 - HC - Income Tax

Summary

Issues Involved:
1. Justifiability of Tribunal's confirmation of Appellate Assistant Commissioner's order deleting penalty u/s 271(1)(c) of the Income-tax Act, 1961.

Summary:

Issue 1: Justifiability of Tribunal's Confirmation of Appellate Assistant Commissioner's Order Deleting Penalty u/s 271(1)(c)

The High Court of Orissa was approached by the Revenue u/s 256(1) of the Income-tax Act, 1961, to opine on whether the Tribunal was legally justified in confirming the order of the Appellate Assistant Commissioner (AAC) deleting the penalty imposed on the assessee u/s 271(1)(c) of the Act.

The assessee, a partnership firm, had its income assessed at Rs. 59,540 against a declared income of Rs. 38,980. The Income-tax Officer (ITO) added Rs. 20,000 as income from undisclosed sources u/s 68, leading to penalty proceedings u/s 271(1)(c). The AAC held that the imposition of penalty was not in order, emphasizing that the onus lies on the Department to prove contumacy of conduct and that the concept of "concealment" imports mens rea. The AAC found that the assessee had discharged the primary onus and that the penalty notice was invalid due to lack of specific mention of concealment or furnishing of inaccurate particulars.

The Tribunal concurred with the AAC, stating that disbelieving the explanation does not prove concealment and that the ingredients required to attract penalty proceedings were not established by the ITO. The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection.

The High Court examined the legislative history of section 271(1)(c) and noted the amendments and explanations introduced over time, particularly the deemed provision introduced after April 1, 1976. The Court emphasized that the initial burden of proof lies on the assessee to rebut the presumption of concealment, and mere failure to substantiate the explanation is not enough to warrant penalty.

The Court found that the Tribunal and the AAC did not consider the case in light of the new Explanation 1 applicable from April 1, 1976. The assessee's explanation was not substantiated with material evidence, and the Tribunal's conclusion that the assessee might have succeeded in appeal was presumptuous and without basis.

The High Court concluded that the AAC and the Tribunal erred in holding that penalty was not imposable. The question referred was answered in the negative, in favor of the Revenue and against the assessee. No costs were awarded.