1987 (6) TMI 40 - HC - Income Tax

Summary

Issues Involved:
1. Basis for holding that the assessee had Rs. 33,000 as at the end of the accounting year.
2. Cancellation of penalty u/s 271(1)(c) of the Income-tax Act, 1961, for the assessment year 1969-70.
3. Justification for separate treatment of penalty for the assessment year 1969-70 compared to other years.

Summary:

Issue 1: Basis for Holding Rs. 33,000 as Cash Balance
The Tribunal found no evidence to support the claim that the assessee had Rs. 33,000 as a cash balance at the end of the accounting year. The Tribunal noted that the Department accepted the total amount available with the assessee as Rs. 79,500, and the investments made during the year amounted to Rs. 78,191. Excluding the cash balance of Rs. 33,000, there was an excess of Rs. 1,309. The Tribunal concluded that there was no basis for holding that the assessee had Rs. 33,000 at the end of the accounting year and that this amount could not be taken as part of the unaccounted investment.

Issue 2: Cancellation of Penalty u/s 271(1)(c)
The Tribunal held that for the assessment year 1969-70, the concealment of income could not be proved. The Tribunal considered the total investments, the amount available with the assessee, and the cash balance. It concluded that the assessee was left with only Rs. 1,309 to explain, and considering the smallness of the amount and the relevant facts and circumstances, no penalty should be imposed. The Tribunal found that the assessee had discharged the burden of proving that the failure to return the correct income did not arise from any fraud or gross or wilful neglect.

Issue 3: Justification for Separate Treatment
The Tribunal justified the separate treatment for the assessment year 1969-70 by noting that the position for this year was slightly different from the other years. The Tribunal observed that the concealment of income for the years 1962-63 to 1967-68 was proved, and the penalties for those years were upheld. However, for the year 1969-70, the Tribunal found that the concealment of income could not be proved, and therefore, no penalty was exigible.

Conclusion:
The High Court answered the questions of law as follows:
1. Question No. 1 was answered in the negative, in favour of the assessee and against the Revenue.
2. Question No. 2 was answered in the affirmative, against the Revenue and in favour of the assessee.
3. Question No. 3 was answered in the affirmative, against the Revenue and in favour of the assessee.

A copy of the judgment will be forwarded to the Tribunal.