1978 (2) TMI 13 - HC - Income Tax

Summary

Issues Involved:
1. Justification of the Tribunal in cancelling the penalty levied u/s 271(1)(c) of the Income-tax Act, 1961.

Summary:

Issue 1: Justification of the Tribunal in cancelling the penalty levied u/s 271(1)(c) of the Income-tax Act, 1961

The Commissioner of Income-tax, Rajasthan II, requested the Tribunal to refer a question of law to the High Court regarding the Tribunal's decision to cancel penalties imposed on the assessee for various assessment years. The penalties were initially imposed by the Income-tax Appellate Commissioner under section 271(1)(c) of the Income-tax Act, 1961, for alleged concealment of income.

The Tribunal, while upholding the additions to the assessee's income, set aside the penalties, stating: "there is nothing to come to a firm conclusion that the amounts added definitely represented the income of the assessee and that too income of the respective years. Unless this is established, in our view, imposition of penalty is not justified."

The revenue's counsel argued that the Tribunal erred by not applying the Explanation to section 271(1)(c), which presumes concealment if the returned income is less than 80% of the assessed income unless the assessee proves otherwise. The counsel cited several cases to support the contention that the burden of proof was on the assessee to show that the disparity was not due to fraud or gross neglect.

The assessee's counsel countered that the Tribunal's findings were based on the totality of evidence and that the Tribunal was not certain that the additions represented the assessee's income for the relevant years. The Tribunal's decision was based on the principle that penalty proceedings are separate from assessment proceedings and require a higher standard of proof.

The High Court concluded that the Tribunal's findings were based on the totality of evidence and that the question of applying the Explanation to section 271(1)(c) did not arise. The Tribunal was justified in deleting the penalties as it could not firmly conclude that the additions were the assessee's income for the relevant years. The applications under section 256(2) of the I.T. Act, 1961, were dismissed.