1985 (1) TMI 25 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of the decision in Rahmat Development & Engineering Corporation v. CIT.
2. Tribunal's finding on similarity of circumstances with Rahmat Development & Engineering Corporation v. CIT.
3. Justification of the Tribunal's finding on the assessee's failure to prove non-fraudulent or non-negligent conduct.
4. Legitimacy of upholding the penalty u/s 271(1)(c) of the Act.

Summary:

1. Applicability of the decision in Rahmat Development & Engineering Corporation v. CIT:
The Tribunal observed that the principles laid down in Rahmat Development & Engineering Corporation v. CIT [1981] 130 ITR 602 (Cal) applied to the facts of this case. The Tribunal held that the amount of Rs. 71,204 added to the income returned by the assessee was the income of the assessee, and failure to return the correct income had to be deemed as concealment of particulars of income or furnishing of inaccurate particulars unless proven otherwise by the assessee.

2. Tribunal's finding on similarity of circumstances with Rahmat Development & Engineering Corporation v. CIT:
The Tribunal found that the circumstances in the present case were similar to those in Rahmat Development & Engineering Corporation v. CIT. The Tribunal noted that the assessee had not produced any material to show that the failure to return the correct income did not arise from fraud or gross or wilful neglect on his part.

3. Justification of the Tribunal's finding on the assessee's failure to prove non-fraudulent or non-negligent conduct:
The Tribunal concluded that the assessee had failed to discharge the onus of proving that the failure to return the correct income did not arise from fraud or gross or wilful neglect. The Tribunal upheld the levy of penalty, stating that the entirety of the circumstances pointed to the conclusion that the assessee had consciously concealed particulars of his income or furnished inaccurate particulars thereof.

4. Legitimacy of upholding the penalty u/s 271(1)(c) of the Act:
The Tribunal upheld the penalty imposed by the ITO, noting that the difference in the cost of construction was treated as income from undisclosed sources. The Tribunal found that the assessee did not provide satisfactory explanations or evidence to reconcile the difference between the cost of construction as determined by the Departmental Valuer and the cost disclosed by the assessee. The Tribunal held that the ITO was correct in applying the Explanation to s. 271(1)(c) as it stood before its amendment, and the penalty was justified.

Conclusion:
The High Court answered all the questions in the affirmative and in favor of the Revenue, confirming the Tribunal's decision to uphold the penalty u/s 271(1)(c) of the Act. The assessee was ordered to pay the costs of the reference.