1990 (12) TMI 57 - HC - Income Tax

Income From Undisclosed Sources, Jurisdiction To Levy Penalty, Law Applicable To Assessment, Penalty, Unexplained Investments

Issues Involved:
1. Entitlement to allowance of business loss incurred in dacoity.
2. Treatment of a sum as unexplained investment.
3. Jurisdiction to impose penalty under section 271(1)(c) post deletion of section 274(2).
4. Applicability of the Explanation to section 271(1)(c) in penalty proceedings.

Issue-wise Detailed Analysis:

1. Entitlement to Allowance of Business Loss Incurred in Dacoity
The primary issue in Income-tax Reference No. 104 of 1983 was whether the assessee was entitled to claim a business loss of Rs. 35,000 due to a dacoity. The assessee firm, dealing in gold and silver ornaments and coins, claimed that their munim, Hari Narain Prasad, was robbed of silver bars and coins. The Income-tax Officer disbelieved the story of the loss, citing discrepancies in the statements and lack of corroborative evidence. The Tribunal upheld this view, noting that the assessee's books did not support the claim and that the transactions were outside the account books. The High Court agreed with the Tribunal, stating that the findings were based on relevant material and not vitiated by any irrelevant or inadmissible considerations.

2. Treatment of a Sum as Unexplained Investment
The second issue in Income-tax Reference No. 104 of 1983 was whether the Tribunal was correct in treating Rs. 15,000 as an unexplained investment. The assessee claimed this amount was paid to an advocate, R. N. Mani, for silver coins handed over for sale. The Tribunal disbelieved this claim, noting the absence of receipts and the improbability of the transaction given the falling silver prices. The High Court upheld this finding, stating that it was based on substantial evidence and not vitiated by any misdirection in law.

3. Jurisdiction to Impose Penalty under Section 271(1)(c) Post Deletion of Section 274(2)
In Income-tax Reference No. 290 of 1981, the issue was whether the Income-tax Officer had jurisdiction to impose a penalty under section 271(1)(c) after the deletion of section 274(2) from the Act. The Tribunal held that the deletion did not affect the jurisdiction as the matter was referred to the Inspecting Assistant Commissioner before the deletion. The High Court agreed, noting that the deletion of section 274(2) did not retroactively affect cases already referred.

4. Applicability of the Explanation to Section 271(1)(c) in Penalty Proceedings
The Tribunal also addressed whether the Explanation to section 271(1)(c) was applicable, which created a presumption of concealment if the returned income was less than 80% of the assessed income. The Tribunal found that the assessee failed to rebut this presumption. The High Court upheld this finding, noting that the Explanation was applicable to the assessment years during which it was in force and that the Tribunal's finding was not perverse or legally misdirected.

Conclusion
The High Court answered all questions against the assessee and in favor of the Revenue. For the business loss and unexplained investment issues, the Tribunal's findings were upheld as they were based on relevant and substantial evidence. Regarding the penalty proceedings, the jurisdiction of the Income-tax Officer and the applicability of the Explanation to section 271(1)(c) were affirmed, with the High Court finding no misdirection in law or perversity in the Tribunal's conclusions.

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