1990 (7) TMI 1 - SC - Income Tax

Whether Tribunal was right in cancelling the penalty levied u/s 271 ( 1 ) (c) - Whether, having regard to the provisions of Explanation to section 271 (1) (c), the Appellate Tribunal s cancellation of penalty is sustainable in law and on the materials on record -Whether Tribunal s view that the addition of Rs. 18,750 did not represent the concealed income of the assessee is based on valid and relevant consideration and is a reasonable view to take on the facts of this case

Summary

Issues:
1. Assessment of income-tax under the Income-tax Act, 1961 for the assessment year 1966-67.
2. Penalty proceedings under section 273(1)(c) of the Act for concealment of income.
3. Refusal of the Tribunal to refer questions of law to the High Court.
4. Interpretation of the Explanation to section 271(1)(c) of the Act regarding concealment of income.

Detailed Analysis:
1. The case involved the assessment of income-tax under the Income-tax Act, 1961 for the assessment year 1966-67. The appellant, an individual engaged in film distribution, initially declared "No loss" in the return of income but later revised it to show a net loss. The Income-tax Officer discovered undisclosed income related to a land purchase and initiated penalty proceedings under section 273(1)(c) for concealment of income. The Inspecting Assistant Commissioner imposed a penalty, which was later set aside by the Tribunal based on the appellant's explanations and legal principles cited. The High Court refused to refer questions of law to the High Court, leading to an appeal to the Supreme Court.

2. The penalty proceedings under section 273(1)(c) of the Act for concealment of income were a crucial aspect of the case. The Income-tax Officer treated a specific amount as undisclosed income, leading to penalty imposition by the Inspecting Assistant Commissioner. The Tribunal overturned the penalty based on the appellant's explanations and the absence of willful negligence or fraudulent intent. The Tribunal's decision was challenged by the Revenue, highlighting the dispute over whether the addition represented concealed income. The Supreme Court analyzed the legal principles regarding concealment of income and the burden of proof on the assessee under the Explanation to section 271(1)(c) of the Act.

3. The refusal of the Tribunal to refer questions of law to the High Court was another significant issue in the case. The Revenue sought to refer questions regarding the cancellation of the penalty by the Tribunal, but the Tribunal declined. Subsequently, the respondent moved the High Court under section 256(2) of the Act, which also found no question of law arising from the Tribunal's decision. This led to the appeal to the Supreme Court challenging the refusal to refer the questions, emphasizing the need for legal clarity on the interpretation of relevant provisions.

4. The interpretation of the Explanation to section 271(1)(c) of the Act regarding concealment of income played a crucial role in the Supreme Court's decision. The court discussed the shifting burden of proof on the assessee in cases where the returned income is less than the assessed income. The court referred to precedents and legal principles to determine whether the appellant had discharged the onus to prove the discrepancy in income declarations. The court emphasized the need for cogent and reliable evidence to rebut the presumption of concealment of income, ultimately setting aside the High Court's decision and directing a reference on the question of law for further consideration.