1979 (2) TMI 86 - HC - Income Tax

Summary

Issues:
Assessment of construction cost for a house, imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961, applicability of the Explanation to section 271(1), interpretation of the law regarding concealment of income, relevance of previous court decisions in penalty proceedings.

Analysis:
The case involved the assessment of the construction cost of a house for the assessee during the assessment year 1961-62. The Income Tax Officer (ITO) estimated the cost at Rs. 45,000, while the assessee claimed it to be Rs. 18,000 from his savings. The Appellate Assistant Commissioner (AAC) reduced the addition to Rs. 25,000, which was further modified by the Tribunal to Rs. 10,000. Subsequently, penalty proceedings were initiated by the ITO, leading to a penalty of Rs. 6,000 imposed by the Income-tax Appellate Commissioner (IAC) based on the assessee's failure to prove the actual cost of construction, indicating concealment of income or gross negligence.

The assessee appealed to the Income-tax Appellate Tribunal, which held that the final addition to the income could not conclusively establish guilt for imposition of penalty. Relying on the Supreme Court decision in Anwar Ali's case, the Tribunal found no grounds for penalty imposition. Additionally, the Tribunal cited the decision of the Kerala High Court to assert that the Explanation to section 271(1)(c) of the Income Tax Act, 1961, did not apply to the relevant assessment year 1961-62, leading to the cancellation of the penalty order.

Upon the Commissioner's application under section 256(1) of the Income Tax Act, 1961, the Tribunal referred the question of law regarding the applicability of the Explanation to section 271(1) for the assessment year 1961-62 to the High Court. In the absence of the assessee during the hearing, the court referenced a previous case to conclude that the Explanation would apply based on the date of filing an incorrect return, leading to the imposition of penalty. The court upheld the applicability of the Explanation and ruled in favor of the revenue, emphasizing the importance of the law effective at the time of the offense. The judgment was concluded in favor of the revenue, with no costs awarded.

Judge C. K. Banerji concurred with the judgment delivered by Judge Dipak Kumar Sen, thereby affirming the decision of the High Court in favor of the revenue regarding the applicability of the Explanation to section 271(1) in penalty proceedings.