1979 (11) TMI 43 - HC - Income Tax

Summary

Issues Involved:
1. Whether penalty under section 271(1)(c) of the Income-tax Act, 1961, could be imposed on the assessee for not including the income of the wife in his returns.
2. Whether the Tribunal was correct in holding that the revenue failed to establish that the income of the wife had to be included in the income of the assessee by virtue of section 64 of the Act.
3. Whether the Explanation to section 271(1) of the Act applied to the case, shifting the burden of proof to the assessee.

Detailed Analysis:

Issue 1: Imposition of Penalty under Section 271(1)(c)
The primary question was whether the penalty under section 271(1)(c) of the Income-tax Act, 1961, could be imposed on the assessee for not including the income of the wife in his returns. The Tribunal held that there was a legal obligation on the assessee to include his wife's income in his return. However, it also concluded that section 271(1)(c) did not cover the wife's income because it was not "his income" within the meaning of the expression as used in section 271 of the Act. Therefore, the levy of penalty was deemed unwarranted.

Issue 2: Revenue's Failure to Establish Inclusion of Wife's Income
The Tribunal further held that the revenue had not established in the penalty proceedings that the income in question arose to the wife as a result of a transfer of assets by the assessee directly or indirectly to his wife otherwise than for adequate consideration. Consequently, the revenue failed to establish that the amount had to be included in the income of the assessee by virtue of section 64 of the Act. This conclusion led to the Tribunal setting aside the orders imposing the penalty.

Issue 3: Application of Explanation to Section 271(1)
The court examined whether the Explanation to section 271(1) applied, which would shift the burden of proof to the assessee. The Explanation states that if the total income returned by any person is less than 80% of the total income assessed, it shall be presumed that the person has concealed the particulars of his income unless he proves that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part.

The court referred to the case of CIT v. Patna Timber Works [1977] 106 ITR 452, where it was held that the burden of proof shifts to the assessee to show the absence of fraud or gross or wilful neglect once the conditions of the Explanation are met. In this case, despite the difference between the returned income and the assessed income being more than 20%, the court found that the assessee had established that the failure to return the correct income did not arise from fraud or gross or wilful neglect. The assessee believed bona fide that he was not required to include his wife's income in his return, which was supported by the legal position and previous judgments.

Conclusion:
The court concluded that the Tribunal's decision to set aside the penalty was correct in law. The revenue had failed to discharge the onus of proving that the assessee had deliberately concealed the particulars of his income or furnished inaccurate particulars due to fraud or gross or wilful neglect. Therefore, the court answered the question referred to it in the affirmative, supporting the Tribunal's decision.

The assessee was entitled to costs, and the hearing fee was set at rupees one hundred only.