1981 (7) TMI 17 - HC - Income Tax

Summary

Issues:
1. Interpretation of Section 271(1)(c) of the Income-tax Act regarding penalty imposition for concealment of income.
2. Applicability of the Explanation to Section 271(1)(c) in determining burden of proof in penalty proceedings.

Analysis:
The case involved an application by the Commissioner of Income-tax seeking direction to the Income-tax Appellate Tribunal to refer questions arising from the assessment of an assessee who dealt in country liquor. The assessee's income was initially returned at Rs. 24,000 but was assessed ex parte at Rs. 1 lakh, later revised to Rs. 36,000 under Section 143(2) of the Income-tax Act. Penalty proceedings were initiated due to the variance between the returned and assessed income, invoking Section 271(1)(c) and the Explanation thereto.

The Income-tax Officer imposed a penalty of Rs. 12,000, alleging the assessee's failure to prove the absence of fraud or neglect. However, the penalty was canceled by the Appellate Assistant Commissioner, a decision upheld by the Income-tax Appellate Tribunal. The Department contended that the Tribunal failed to consider the Explanation to Section 271(1)(c) and the burden of proof, necessitating a reference to the court, citing a Supreme Court decision in Addl. CIT v. Chandravilas Hotel [1978] 115 ITR 118.

The High Court, after reviewing the Tribunal's order and relevant material, found that the Tribunal correctly addressed the issues and concluded that there was no concealment of income by the assessee. The court distinguished the cited Supreme Court case, emphasizing the importance of considering all evidence in arriving at a finding. It referenced CIT v. Goswami Smt. Chandralata Bahuji [1980] 125 ITR 700, highlighting the necessity of substantial evidence to justify a penalty under Section 271(1)(c).

The court clarified that the key question for imposing a penalty under Section 271(1)(c) is whether there was concealment or inaccurate furnishing of income particulars. As both the Appellate Assistant Commissioner and the Tribunal found no grounds for penalty imposition, based on an overall assessment of evidence, no question of law arose. The court dismissed the application, emphasizing the absence of any legal issue warranting further consideration.