1981 (7) TMI 7 - HC - Income Tax

Summary

Issues:
1. Whether the Tribunal was justified in holding that the assessee cannot be guilty of failure to return the correct income under s. 271(1)(c) and deleting the penalty imposed?
2. Whether the Tribunal was correct in holding that the amended provisions of s. 271(1)(c) from April 1, 1968, do not apply for the assessment year 1964-65, despite the assessee filing a revised return post-amendment?

Analysis:
The case involved a penalty imposed under s. 271(1)(c) of the I.T. Act, 1961, by the IAC for default in disclosing income. The Department alleged concealment in cash credits totaling Rs. 21,300. The Tribunal deleted an excess of Rs. 1,500, leaving Rs. 17,980 as the contested amount. The ITO treated a cash credit of Rs. 22,980 as the assessee's income from an undisclosed source, leading to penalty proceedings. The IAC imposed a penalty of Rs. 21,300, applying the Explanation to s. 271(1)(c) and the higher quantum post-April 1, 1968, due to a revised return filed by the assessee.

The Tribunal set aside the penalty, citing that the Department failed to prove the income enhancement belonged to the assessee or was of a revenue nature, invoking precedents like Anwar Ali's case. The Tribunal held the amended s. 271(1)(c) from April 1, 1968, did not apply retrospectively. The Department argued the burden under the Explanation rested on the assessee, challenging the Tribunal's view. The Tribunal emphasized the need for the Department to establish the income belonged to the assessee and was of a revenue nature.

The Tribunal rejected the Department's contention that the father's capacity to save Rs. 22,980 was insufficient, reducing the addition by Rs. 5,000. It noted the burden on the assessee to explain under the Explanation, requiring reasonableness rather than conclusive proof. The Tribunal found the assessee had discharged this burden adequately, leading to the deletion of the penalty. Consequently, the first issue favored the assessee, rendering the second issue moot.

In conclusion, the Tribunal's decision to delete the penalty was upheld, emphasizing the importance of the Department proving income concealment and the applicability of the Explanation under s. 271(1)(c). The Tribunal's reliance on legal precedents and the burden of proof on the assessee were pivotal in determining the outcome of the case.