1979 (9) TMI 68 - HC - Income Tax

Summary

Issues:
1. Penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.
2. Justification of quashing the penalty by the Tribunal.

Analysis:
The High Court of Rajasthan dealt with a reference under section 256(1) of the Income-tax Act, 1961 regarding the imposition of a penalty on the assessee. The case involved Firm Messrs Sohan Lal Brij Lal, a wholesale dealer in artificial silk and nylon, for the assessment year 1963-64. The Income Tax Officer (ITO) made additions to the income of the assessee, alleging suppression of stock value and income from unrecorded transactions. The matter was referred to the Inspecting Assistant Commissioner of Income-tax (IAC) for penalty determination under section 271(1)(c) of the Act. The IAC imposed a penalty of Rs. 12,185 on the assessee for concealing income.

The assessee appealed to the Appellate Tribunal, which set aside the penalty, stating that no concealment was established. The Commissioner of Income Tax (CIT) then filed an application under section 256(1) to refer the question of law to the High Court. The Tribunal had observed discrepancies in the stock reported to the bank and the books of account but did not find deliberate concealment of income by the assessee.

The Court analyzed the findings of the IAC and the Tribunal regarding the alleged concealment. The IAC had held that the assessee deliberately concealed profit by understating stock value, while the Tribunal found the assessee's explanation unsatisfactory but did not conclude deliberate concealment. The Court referred to precedents stating that penalty imposition requires proof of conscious concealment or furnishing inaccurate particulars by the assessee. Merely providing a false explanation does not justify penalty imposition.

Based on the principles laid down by the Supreme Court, the Court concluded that the unsatisfactory explanation provided by the assessee for the stock discrepancy did not amount to deliberate concealment of income. Therefore, the Court upheld the Tribunal's decision to quash the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961. The Court answered the question in the affirmative, ruling in favor of the assessee and declining to award costs in the matter.