1985 (12) TMI 4 - HC - Income Tax

Summary

Issues:
1. Ownership of wrist watches by the assessee and inclusion in assessment.
2. Justification of penalty for concealment of income by the assessee.

Ownership of Wrist Watches:
The case involved a reference made by the Income-tax Appellate Tribunal regarding the ownership of wrist watches by the assessee and their inclusion in the assessment. The assessee was found in possession of 565 foreign-made wrist watches during a raid at his residence. The Department contended that the assessee was the owner of the watches and had failed to disclose their value in the income tax return. The Tribunal held that the burden of proving ownership lay on the assessee and since he did not provide evidence to the contrary, possession followed title. The watches' value was deemed as income of the assessee under section 69A of the Income-tax Act, and the inclusion in the assessment was justified based on surrounding circumstances and unsatisfactory explanations by the assessee.

Justification of Penalty for Concealment of Income:
Regarding the penalty imposed for concealing income, the Department relied on the Explanation to section 271(1)(c) of the Act. The Explanation stated that if the total income returned by a person is less than 80% of the total assessed income, it is deemed as concealment unless proven otherwise. In this case, the assessee's returned income was significantly lower than the total assessable income due to the undisclosed value of the seized watches. The burden of proving absence of fraud or neglect was on the assessee, which he failed to discharge. The Tribunal found that the penalty proceedings were penal in nature, and the burden of proof was on the assessee, who did not provide a satisfactory explanation. The penalty amount of Rs. 90,000 was deemed appropriate considering the concealment of income amounting to Rs. 87,455. The Tribunal upheld the penalty imposed by the Inspecting Assistant Commissioner of Income-tax.

In conclusion, the High Court upheld the Tribunal's decision on both issues in favor of the Department and against the assessee. The ownership of the wrist watches was deemed to be with the assessee, justifying their inclusion in the assessment. Additionally, the Department was found to have discharged its burden of proof for establishing the concealment of income by the assessee, warranting the penalty imposition. The parties were directed to bear their own costs incurred during the proceedings.