1987 (2) TMI 86 - AT - Income Tax

Issues Involved:

1. Validity of the grounds of appeal raised by the revenue.
2. Assessment of professional income and the associated penalties under section 271(1)(c) of the IT Act.
3. Evaluation of the evidence and the credibility of the assessee's claims regarding professional income and expenses.
4. Application of the "Explanation" to section 271(1)(c) and the concept of "concealment" of income.

Detailed Analysis:

Issue 1: Validity of the Grounds of Appeal Raised by the Revenue

The initial objection raised by the learned Advocate General was that the grounds of appeal by the revenue did not clearly articulate their grievance. Specifically, ground No. 3 was criticized for being a "jumbled array of words without any meaning whatsoever." However, it was accepted that ground No. 1 was sufficiently broad to cover all issues related to the imposition and deletion of the penalty.

Issue 2: Assessment of Professional Income and Associated Penalties Under Section 271(1)(c) of the IT Act

The assessee, an Advocate of the Gujarat High Court, initially filed a return showing professional income of Rs. 18,600. However, the ITO assessed the professional income at Rs. 96,000, later revised to Rs. 51,000 after re-examination. The CIT(A) provided relief by deleting an addition of Rs. 5,000 and recognizing Rs. 13,000 as reimbursement of expenditure. The ITO issued a show-cause notice under section 271(1)(c) for concealment of income, which was contested by the assessee, leading to a penalty of Rs. 14,400.

Issue 3: Evaluation of the Evidence and Credibility of the Assessee's Claims

The ITO's assessment was based on a diary seized during a raid, containing details of receipts linked to the assessee's professional income. The assessee's claims of expenditure (Rs. 22,050 on hotel bills and Rs. 4,500 paid to a Junior Counsel) were not substantiated with proper evidence. The CIT(A) deleted the penalty, accepting the principle that both receipts and expenditure sides of the diary should be considered. However, the Tribunal found the assessee's explanations inconsistent and lacking credibility, particularly regarding the characterization of gross receipts and net receipts.

Issue 4: Application of the "Explanation" to Section 271(1)(c) and the Concept of "Concealment" of Income

The Tribunal held that the "Explanation" to section 271(1)(c) applied, as the returned income was less than 80% of the assessed income. The onus was on the assessee to prove that the failure to file the correct income did not arise from fraud or gross or willful neglect. The Tribunal found that the assessee failed to rebut the presumption of concealment, with explanations that were contradictory and unsupported by evidence. The Tribunal concluded that the expenditure claimed was not bona fide but bogus, and upheld the penalty.

Conclusion:

The Tribunal reversed the order of the CIT(A) and confirmed the levy of penalty, finding that the revenue had conclusively proved the charge of concealment. The appeal by the revenue was allowed.

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