1989 (1) TMI 55 - HC - Income Tax

Summary

Issues Involved:
1. Justification of the Appellate Tribunal's decision regarding concealment of income.
2. Applicability of the Explanation to section 271(1)(c) of the Income-tax Act, 1961.
3. Burden of proof in penalty proceedings under section 271(1)(c).

Summary:

1. Justification of the Appellate Tribunal's Decision:
The primary issue was whether the Appellate Tribunal was justified in holding that the assessee had neither concealed particulars of income nor furnished inaccurate particulars of income, thereby deleting the penalty of Rs. 27,000 imposed u/s 271(1)(c) for the assessment year 1971-72. The Tribunal relied on the decisions in CIT v. Anwar Ali [1970] 76 ITR 696 (SC) and CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC), concluding that the Revenue failed to establish the assessee's guilt of concealment of income.

2. Applicability of the Explanation to Section 271(1)(c):
The court noted that the Explanation to section 271(1)(c) of the Act, introduced by the Finance Act, 1964, shifts the burden to the assessee to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect. The Tribunal misdirected itself by not considering the applicability of this Explanation, which was crucial in determining the case. The court emphasized that the decisions in CIT v. Anwar Ali and CIT v. Khoday Eswarsa and Sons were not applicable as they dealt with the unamended provisions of the Indian Income-tax Act, 1922.

3. Burden of Proof in Penalty Proceedings:
The court highlighted that the Explanation to section 271(1)(c) raises a rebuttable presumption that the assessee concealed particulars of income or furnished inaccurate particulars if the returned income is less than eighty percent of the assessed income. The assessee failed to rebut this presumption by not providing any explanation during the penalty proceedings. The Tribunal's conclusion that the assessee had discharged the onus was based on no evidence and was deemed to be a result of conjecture and surmise.

Conclusion:
The court held that the Appellate Tribunal was not justified in deleting the penalty imposed u/s 271(1)(c) of the Act. The Tribunal had misdirected itself by not applying the Explanation to section 271(1)(c) and by relying on inapplicable precedents. The question referred to the court was answered in favor of the Revenue, and the Revenue was entitled to costs of Rs. 500.