1975 (7) TMI 27 - HC - Income Tax

Summary

Issues Involved:

1. Onus of proof in penalty proceedings under section 28(1)(c) of the Indian Income-tax Act, 1922.
2. Evidence to disprove the findings of income-tax authorities regarding concealed income.
3. Sufficiency of evidence to uphold the imposition of penalty.
4. Justification of penalty imposition by the Tribunal.

Detailed Analysis:

1. Onus of Proof in Penalty Proceedings:

The Tribunal held that the Income-tax Officer must be satisfied that the assessee concealed particulars of income or deliberately furnished inaccurate particulars. The department must establish that what is considered concealed is actually the assessee's income. The Tribunal found no materials proving the amount represented the assessee's income, and thus, imposition of penalty under section 28(1)(c) was not justified. The Tribunal relied on the judgment of the Calcutta High Court in *Commissioner of Income-tax v. Anwar Ali* [1967] 65 ITR 95 (Cal).

2. Evidence to Disprove Findings:

The Tribunal found that the department had not found any materials to hold that the amount represented the assessee's income. This finding of fact was not challenged in any of the questions raised by the revenue. The Supreme Court in *Anwar Ali's case* [1970] 76 ITR 696 (SC) stated that the department must establish that the receipt constitutes the assessee's income. If the explanation given by the assessee is found to be false, it does not automatically mean the receipt constitutes taxable income.

3. Sufficiency of Evidence to Uphold Penalty:

The Tribunal held that the evidence regarding the failure of the assessee to explain the source of the disputed receipt was not sufficient to uphold the imposition of penalty. The Supreme Court in *Commissioner of Income-tax v. Khoday Eswarsa and Sons* [1972] 83 ITR 369 (SC) held that penalty proceedings being penal in character, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. Penalty cannot be levied solely on the basis of reasons given in the original order of assessment.

4. Justification of Penalty Imposition by the Tribunal:

The Tribunal concluded that the imposition of penalty was not justified. The Supreme Court in *Commissioner of Income-tax v. N. A. Mohamed Haneef* [1972] 83 ITR 215 (SC) emphasized that penalty proceedings require cogent material or evidence from which it could be inferred that the assessee has consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars.

Conclusion:

Questions Nos. 1 and 3 were answered in the affirmative and in favor of the assessee, based on the Supreme Court decisions. Question No. 2 was answered in the affirmative, as the evidence before the Tribunal was the original evidence before the Income-tax Officer, which was disbelieved. Question No. 4 was answered in the affirmative, as the Tribunal's conclusion was correct based on the law laid down by the Supreme Court. There was no order as to costs.