1978 (10) TMI 19 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was correct in law in holding that the assessee could be proceeded against either for factual concealment or for fictional concealment u/s 271(1)(c) and if the assessee was proceeded for charge of concealment, the penalty could not be levied for fictional concealment under the Explanation to section 271(1)(c)?
2. Whether the Tribunal has been correct in law in holding that before a penalty under the Explanation to section 271(1)(c) can be imposed, the assessee must be given a clear opportunity of meeting a case under such Explanation?
3. Whether the Tribunal in this case was justified in law in holding that the levy of penalty u/s 271(1)(c) read with section 274(2) was unsustainable and thereby cancelling the penalty of Rs. 10,000?

Summary of Judgment:

Issue 1:
The Tribunal was correct in law in holding that the assessee could be proceeded against either for factual concealment or for fictional concealment u/s 271(1)(c). If the assessee was proceeded for the charge of concealment, the penalty could not be levied for fictional concealment under the Explanation to section 271(1)(c). The court emphasized that the burden of proof lies on the department to establish that the receipt of the amounts in dispute constituted income of the assessee. The mere rejection of the assessee's explanation does not automatically lead to the conclusion that the receipt constituted taxable income.

Issue 2:
The Tribunal's decision on this issue was deemed unnecessary to address. The court focused on the broader legal principles and the specific facts of the case to arrive at its conclusions.

Issue 3:
The Tribunal was justified in law in holding that the levy of penalty u/s 271(1)(c) read with section 274(2) was unsustainable and thereby cancelling the penalty of Rs. 10,000. The court highlighted that the mere fact that the explanation of the assessee was found unsatisfactory and the deeming provision of s. 69A was invoked does not necessarily mean that the assessee has not discharged the burden cast upon him by the Explanation. The court reiterated that in penalty proceedings, the department must establish that the receipt of the amount in dispute constituted income of the assessee, and this burden was not discharged in the instant case.

Conclusion:
The questions referred to the court were answered as follows:
- Question No. 1: In the affirmative as to both parts, in favour of the assessee and against the revenue.
- Question No. 2: Not necessary.
- Question No. 3: In the affirmative, in favour of the assessee and against the revenue.

The Commissioner was ordered to pay the costs of the reference to the assessee.