1984 (7) TMI 32 - HC - Wealth-tax

Summary

Issues: Wealth-tax assessment for the years 1970-71, 1971-72, and 1972-73; Interpretation of the Explanation to section 271(1)(c) of the Income Tax Act; Acceptability of assessee's explanation in penalty proceedings.

Analysis:

The judgment addressed three Wealth-tax References concerning the assessment years 1970-71, 1971-72, and 1972-73, highlighting a common question of law and fact. The main issue revolved around the acceptability of the assessee's explanation under section 18(1)(c) of the Wealth Tax Act, particularly in light of the Full Bench decision in Vishwakarma Industries v. CIT [1982] 135 ITR 652, which overruled the Division Bench decision in Addl. CIT v. Karnail Singh [1974] 94 ITR 505. The Revenue contended that the Tribunal's reliance on Karnail Singh's case was erroneous, advocating for a remittal to the Tribunal for a firm finding or setting aside the order. However, the court dismissed these submissions, emphasizing the significance of the Explanation to section 271(1)(c) of the Income Tax Act and the burden of proof on the assessee regarding concealment due to fraud or neglect.

The Tribunal correctly interpreted the Explanation, placing the onus on the assessee to prove the non-existence of fraud or neglect. It scrutinized the facts, deemed the assessee's explanation as plausible, and shifted the burden to the Revenue to establish its falsity. Notably, the Tribunal's approach aligned with the Full Bench's ruling in Vishwakarma Industries, emphasizing the legislative intent behind the Explanation to shift the burden of proof onto the assessee in cases where the returned income was less than the assessed income. The court reiterated that once the explanation is found plausible, absent evidence of falsity by the Revenue, it must be accepted, rejecting the notion that the Department's assertion alone renders the explanation false.

Conclusively, the court ruled in favor of the assessee in all three references, emphasizing the need for the Revenue to substantiate the falsity of the explanation when deemed plausible by the Tribunal. The judgment underscored the importance of the Explanation's legal import and the burden of proof dynamics in penalty proceedings, aligning with the principles elucidated in Vishwakarma Industries.