1984 (1) TMI 25 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee could be held guilty of concealment of income due to disputes and litigation with the Railway authorities.
2. Whether the levy of penalty u/s 271(1)(c) was justified.

Summary:

Issue 1: Concealment of Income
The court examined whether the assessee-firm was guilty of concealment of income given the disputes and litigation with the Railway authorities. The assessee-firm, a railway contractor, had filed an original return showing a loss and later a revised return showing an income after an arbitration award. The court noted that income accrues when the right to receive it becomes vested, even if actual payment is delayed. The assessee's right to the income accrued when the work was completed and bills were submitted, not when payment was received. However, the court found that the assessee had kept the Income Tax Officer (ITO) informed about the ongoing disputes and arbitration, and filed the revised return promptly after the decree was passed. The court concluded that the assessee's conduct was honest and bona fide, and there was no deliberate concealment of income.

Issue 2: Levy of Penalty u/s 271(1)(c)
The court addressed whether the penalty u/s 271(1)(c) was justified. It emphasized that penalty proceedings are quasi-criminal in nature, requiring the Revenue to prove conscious concealment of income. The court observed that the ITO had merely called for information and had not discovered any concealment before the revised return was filed. The revised return was filed voluntarily by the assessee before the ITO proceeded further with the investigation. The court held that the entirety of circumstances, including the ongoing litigation and arbitration, indicated that there was no deliberate concealment. Consequently, the levy of penalty was not justified.

Conclusion:
The court answered both questions in the negative, ruling against the Revenue. It held that the assessee-firm was not guilty of conscious concealment of income and that the levy of penalty u/s 271(1)(c) was not justified in the facts and circumstances of the case.