1985 (5) TMI 38 - HC - Income Tax

Summary

Issues:
1. Whether mens rea need to be established in penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961?
2. Whether penalty under section 271(1)(c) is leviable in a case where the returned income is less than 80% of the assessed income?

Analysis:
Issue 1: The Commissioner of Income-tax sought a mandamus to refer questions regarding mens rea in penalty proceedings under section 271(1)(c) to the High Court. The Tribunal had declined to make a reference, but the High Court held that the burden rests on the Revenue to prove concealment of income, and mens rea need to be established. The Tribunal's view was based on the presumption that if returned income is less than 80% of assessed income, there is deliberate concealment. However, the Tribunal's decision was influenced by an outdated interpretation of the law.

Issue 2: The case involved penalty proceedings initiated by the Inspecting Assistant Commissioner under section 271(1)(c) for alleged suppression of sales and non-claimable expenditure. The Tribunal held that no penalty could be imposed as the Revenue failed to prove that the additions to income were accurate. The Tribunal emphasized that the burden of proof shifts to the assessee under the Explanation to section 271(1)(c) but can be discharged by preponderance of evidence. The High Court directed the Tribunal to refer the questions of law for opinion, indicating a shift in the legal landscape regarding penalty proceedings and the burden of proof.

The judgment highlighted the evolving interpretation of penalty provisions under the Income-tax Act, emphasizing the importance of establishing mens rea and the burden of proof in penalty proceedings. It clarified the role of the assessee in rebutting presumptions raised by the Explanation to section 271(1)(c) and the need for preponderance of evidence. The High Court's decision to refer the questions of law underscored the significance of a nuanced understanding of legal principles in determining the imposition of penalties under tax laws.