1984 (2) TMI 39 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Appellate Tribunal was correct in law in cancelling the penalties for the assessment years 1967-68 to 1969-70.
2. Whether the Appellate Tribunal's finding for each of these years that the assessee had not concealed particulars of its income is a reasonable view to take on the facts of the case.

Summary:

Issue 1: Cancellation of Penalties
The Income-tax Appellate Tribunal cancelled the penalties imposed by the IAC u/s 271(1)(c) of the I.T. Act, 1961, for the assessment years 1967-68 to 1969-70. The Tribunal reasoned that the income from the sale of import licences was estimated and not based on concrete evidence of concealment. The Tribunal held that the difference between the estimated income and the disclosed income does not automatically justify the imposition of penalties.

Issue 2: Concealment of Income
The Tribunal found that the assessee had not concealed particulars of its income. It accepted the assessee's explanation that the inability to produce documents was due to the lapse of time and that the names and addresses of some parties could not be traced. The Tribunal concluded that the estimation of income alone does not prove concealment.

Legal Precedents and Analysis:
The Revenue contended that the Tribunal's view was inconsistent with previous decisions such as Bashu Sahib v. CIT [1977] 108 ITR 736, Addl. CIT v. Bhoopathy [1978] 113 ITR 188, and Rathnam & Co. v. IAC [1980] 124 ITR 376, where it was held that penalty u/s 271(1)(c) could be imposed even if the assessment was based on an estimate, provided there was a deliberate understatement of income.

The court noted that the assessee's returned income was significantly lower than the market quotations and that the assessee failed to provide requisite details when called for. The court emphasized that the Explanation to s. 271(1)(c) shifts the onus to the assessee to prove that the discrepancy was not due to fraud or wilful neglect. The assessee's failure to produce documents was seen as indicative of fraud or wilful neglect.

Conclusion:
The court disagreed with the Tribunal's view that neither the main part of s. 271(1)(c) nor the Explanation was applicable. It held that the assessee had not established that the gap between the returned income and the assessed income was not due to fraud or wilful neglect. Consequently, the court answered both questions in the negative and against the assessee, upholding the applicability of penalty provisions u/s 271(1)(c). There was no order as to costs.