1987 (9) TMI 39 - HC - Income Tax

Summary

Issues Involved:
1. Imposition of penalty based on the finding in the quantum appeal.
2. Material evidence to hold the assessee guilty of concealment and furnishing inaccurate particulars.

Summary:

Issue 1: Imposition of penalty based on the finding in the quantum appeal
The Tribunal upheld the penalty imposed on the assessee, M/s. Banaras Textorium, for furnishing inaccurate particulars of income based on the finding in the quantum appeal. The Tribunal confirmed the penalty solely on the basis that it had upheld the disallowance of the bad debt claim in the quantum appeal, deeming the transactions with Abdul Ghani as not genuine. The Tribunal's approach was criticized for treating the penalty as an automatic consequence of the quantum appeal findings, without independently assessing the penalty proceedings.

Issue 2: Material evidence to hold the assessee guilty of concealment and furnishing inaccurate particulars
The assessee argued that penalty proceedings are independent of assessment proceedings and that the Tribunal erred by not considering the statements of Abdul Ghani and the managing partner, nor the affidavit filed during the penalty proceedings. The Tribunal and the Inspecting Assistant Commissioner did not evaluate whether the assessee's failure to return the correct income was due to fraud or gross or willful neglect, as required by the Explanation to section 271(1)(c). The court noted that the burden of proof shifts to the assessee to show that the failure was not due to fraud or gross neglect, and if the assessee discharges this burden, the presumption of concealment stands rebutted.

Conclusion:
The court found that the Tribunal failed to apply its independent mind and did not consider the Explanation to section 271(1)(c). The matter was remanded to the Tribunal for fresh consideration, directing it to decide the penalty issue in accordance with the law and the observations made in this judgment. The reference was returned unanswered, and each party was directed to bear its own costs.