1987 (3) TMI 94 - HC - Income Tax

Summary

Issues:
- Interpretation of section 271(1)(c) of the Income-tax Act
- Application of the Explanation to section 271(1)(c)
- Burden of proof on the assessee regarding income concealment
- Consideration of evidence by the Income-tax Appellate Tribunal

Interpretation of section 271(1)(c) of the Income-tax Act:
The case involved a firm of contractors that filed a return declaring income, which was later revised by the Income-tax Officer. A penalty notice was issued under section 271(1)(c) of the Income-tax Act due to the shortfall between the returned and assessed income. The Appellate Assistant Commissioner initially canceled the penalty, a decision upheld in the second appeal.

Application of the Explanation to section 271(1)(c):
The Revenue argued that the Explanation to section 271(1)(c) applied since the returned income was less than 80% of the assessed income. The Explanation shifts the burden to the assessee to prove no fraud or neglect led to the incorrect return. The court found that the Appellate Assistant Commissioner and the Tribunal erred in not considering this Explanation while deciding on the penalty.

Burden of proof on the assessee regarding income concealment:
The court cited a previous case to emphasize that even if the income addition was based on an estimate, the penalty could still apply if the assessee failed to prove no fraud or wilful negligence. The onus to rebut the presumption of concealment was on the assessee, requiring proof that the difference in income was not due to fraud or neglect.

Consideration of evidence by the Income-tax Appellate Tribunal:
The court highlighted that the Tribunal failed to consider the evidence and whether the assessee had successfully rebutted the presumption of concealment. As the presumptions raised by the Explanation were rebuttable, the Tribunal should have evaluated the evidence to determine if the assessee had discharged the burden of proof.

Conclusion:
The court directed the Income-tax Appellate Tribunal to reconsider the appeal, emphasizing the importance of considering the Explanation to section 271(1)(c) and evaluating the evidence to determine if the assessee had proven no fraud or neglect led to the incorrect return. The judgment returned the question unanswered and instructed a fresh decision by the Tribunal without any costs awarded.