1985 (8) TMI 35 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Appellate Tribunal was right in law in holding that the onus placed by the Explanation to section 271(1)(c) of the Income-tax Act, 1961, was discharged.
2. Whether the Appellate Tribunal was right in law in holding that no penalty was exigible.

Summary:

Issue 1: Onus of Proof u/s 271(1)(c)
The court examined whether the Appellate Tribunal correctly held that the onus placed by the Explanation to section 271(1)(c) of the Income-tax Act, 1961, was discharged. The Tribunal had initially found that the onus lay on the Department to prove that the receipt of Rs. 27,500 constituted the income of the assessee and relied on CIT v. Anwar Ali [1970] 76 ITR 696 (SC) and CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC). However, the court noted that the Full Bench in Vishwakarma Industries v. CIT [1982] 135 ITR 652 had clarified that the onus was on the assessee to rebut the presumptions arising under the Explanation to section 271(1)(c). The court concluded that the Tribunal erred in placing the onus on the Department and decided the first question in favor of the Department, holding that the onus was not discharged by the assessee.

Issue 2: Exigibility of Penalty
Regarding the second issue, the court evaluated whether the Tribunal was correct in holding that no penalty was exigible. The Tribunal had concluded that the onus on the assessee was discharged based on the consistent statements of Karnail Singh, who claimed to have advanced the loan. However, the court found that the Tribunal did not consider the legal principles established by the Full Bench in Vishwakarma Industries' case, which required the assessee to provide cogent evidence to rebut the presumptions of fraud or gross/wilful neglect. The court noted that the assessee failed to provide such evidence and merely relied on the depositor's statements and affidavits, which were insufficient. Consequently, the court held that the Tribunal was wrong in concluding that the onus was discharged and that no penalty was exigible. The second question was also decided in favor of the Department.

Conclusion:
Both questions were answered in favor of the Department and against the assessee, with the court holding that the onus was not discharged by the assessee and that penalty was exigible. There was no order as to costs.