1987 (6) TMI 34 - HC - Income Tax

Summary

Issues Involved:
1. Justification of the Tribunal in canceling the levy of penalty of Rs. 2 lakhs u/s 271(1)(c) of the Income-tax Act, 1961, for the assessment year 1970-71.
2. If the answer to the first issue is negative, whether the Tribunal was justified in holding that the penalty, if imposable, was exigible only to the extent of Rs. 33,500 and not the balance.

Summary:

Issue 1: Justification of the Tribunal in Canceling the Penalty
The High Court examined whether the Tribunal was justified in canceling the penalty of Rs. 2 lakhs imposed u/s 271(1)(c) of the Income-tax Act, 1961. The respondent, a salaried employee, was found with Rs. 1,50,000 and documents showing remittances of Rs. 33,500 during a search at Madras airport. The Income-tax Officer included these amounts as the respondent's income, which was affirmed by the Appellate Assistant Commissioner and the Appellate Tribunal. However, the Tribunal held that there was no material to prove that Rs. 1,50,000 was the respondent's income and thus no penalty was exigible for this amount. The Tribunal restricted the penalty to Rs. 33,500, leading to the cancellation of the Rs. 2 lakhs penalty.

The High Court upheld the Tribunal's decision, noting that the burden of proof was on the assessee to show that the failure to return the correct income did not arise from fraud or gross or willful neglect. The Tribunal found no evidence of concealment or fraud, only an unsatisfactory explanation regarding the nature and source of the amounts. The High Court referenced the Supreme Court's ruling in CIT v. Mussadilal Ram Bharose, emphasizing that the presumption of concealment is rebuttable and the Tribunal's findings were based on relevant and cogent materials.

Issue 2: Penalty Exigible to the Extent of Rs. 33,500
Since the High Court answered the first issue in the affirmative, stating that the Tribunal was justified in canceling the penalty, it declined to address the second issue regarding the extent of the penalty.

Conclusion:
The High Court affirmed the Tribunal's decision to cancel the penalty of Rs. 2 lakhs, holding that the Tribunal's findings were justified and based on a proper assessment of the facts and legal principles. The case was disposed of with the first question answered in favor of the assessee and against the Revenue, and the second question was not addressed.