1987 (1) TMI 27 - HC - Income Tax

Income From Undisclosed Sources Penalty Previous Year Year In Which Penalty Could Be Levied

Summary

Issues:
The judgment involves issues regarding the imposition of a penalty under section 28(1)(c) of the Indian Income-tax Act, 1922, for non-disclosure of income, specifically focusing on the sustainability of the penalty order u/s 28(1)(c) for the assessment year 1950-51.

Details of the Judgment:
The case pertains to an assessee, a Hindu undivided family deriving income from various businesses, including the "Goenka Cotton Company." The controversy arose from cash credit entries in the personal account of the family's karta, Babulal, totaling Rs. 24,600 in November 1948. The Income-tax Officer added this amount to the total income, not granting relief for earned income, citing it as income from undisclosed sources.

The Tribunal initially set aside the penalty order due to lack of proper hearing but later upheld a penalty of Rs. 5,000 for non-disclosure of the Rs. 24,600 amount. The Appellate Assistant Commissioner confirmed this penalty, leading to an appeal by the assessee to the Tribunal.

The Tribunal considered the previous year for the undisclosed income and upheld the penalty. However, the Tribunal's decision was challenged based on the argument that the said amount of Rs. 24,600 fell outside the relevant previous year for assessment.

The assessee relied on legal precedents, including the case law of CIT v. Gokuldas Harivallabhdas and CIT v. Anwar Ali, emphasizing that penalty proceedings are penal in nature and distinct from assessment proceedings. The burden of proof in penalty proceedings is on the prosecution, and the entirety of circumstances must reasonably point to deliberate concealment or furnishing of inaccurate particulars by the assessee.

The High Court analyzed the facts, noting that the Rs. 24,600 amount was erroneously assessed as income from undisclosed sources for the assessment year 1950-51. Referring to the Supreme Court's decision in Baladin Ram v. CIT, it highlighted the necessity for proper assessment based on the financial year for income from undisclosed sources.

In conclusion, the High Court ruled in favor of the assessee, stating that no penalty could be imposed for non-disclosure of the Rs. 24,600 income for the assessment year 1950-51 under the provisions of the Indian Income-tax Act, 1922.

This judgment clarifies the legal principles governing penalty proceedings and the assessment of undisclosed income, emphasizing the importance of proper assessment based on the relevant financial year.