1990 (11) TMI 33 - HC - Income Tax

Summary

Issues Involved:
1. Justification of the Appellate Tribunal in cancelling the penalty imposed u/s 271(1)(c).
2. Reasonableness of the Appellate Tribunal's finding that there was no concealment in respect of the additions agreed to by the assessees.

Summary:

Issue 1: Justification of the Appellate Tribunal in Cancelling the Penalty Imposed u/s 271(1)(c):

The High Court examined whether the Appellate Tribunal was justified in cancelling the penalty imposed u/s 271(1)(c) of the Income-tax Act, 1961. The assessees had originally filed returns based on manipulated accounts, which were later admitted to be inaccurate. Despite revised returns and further disclosures, the Tribunal found no concealment of income. However, the High Court disagreed, noting that the original and revised returns did not disclose correct particulars and suppressed profits from the sale of import licenses. The Tribunal's reasoning, including the claim that revised returns were filed before detection and that the concealment was indefinite, was found to be flawed. The High Court emphasized that the concealment was specific and the assessees had agreed to large additions to their income, which justified the penalty.

Issue 2: Reasonableness of the Appellate Tribunal's Finding of No Concealment:

The High Court scrutinized the Tribunal's finding that there was no concealment in respect of the additions agreed to by the assessees. The Tribunal had reasoned that the revised returns were filed before any detection and that the income estimates by the Revenue were higher than those of the assessees. The High Court found this reasoning unsatisfactory, stating that the filing of revised returns with inaccurate particulars before detection does not exonerate the assessees from penalty under section 271(1)(c). The Tribunal's view that the charge of concealment was indefinite was also rejected, as the income assessed was specific and agreed upon by the assessees. Additionally, for the assessment year 1964-65, the Explanation to section 271(1)(c) was applicable, and the assessees failed to prove that the failure to return the correct income did not arise from fraud or gross or willful neglect.

Conclusion:

The High Court concluded that the Tribunal was not justified in cancelling the penalty imposed on the assessees under section 271(1)(c) and that the Tribunal's finding of no concealment was not based on materials or evidence and was unreasonable. The questions were answered in the negative, in favor of the Revenue, with costs awarded to the Revenue.