1985 (3) TMI 86 - AT - Income Tax

Summary

Issues Involved:
1. Whether the Commissioner (Appeals) erred in cancelling the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.
2. Whether the businesses run by certain individuals actually belonged to the assessee-HUF.
3. Whether the additional evidence considered by the Commissioner (Appeals) was admissible.
4. Whether the penalty proceedings under section 271(1)(c) were justified based on the findings in the assessment proceedings.

Issue-Wise Detailed Analysis:

1. Cancellation of Penalty under Section 271(1)(c):
The primary contention in the departmental appeal was that the Commissioner (Appeals) had erred in cancelling the penalty of Rs. 1,46,000 imposed by the ITO under section 271(1)(c) of the Income-tax Act, 1961. The Commissioner (Appeals) found that the assessee had not concealed any income or failed to discharge its burden in terms of the Explanation to section 271(1)(c). He concluded that the failure to return the correct income did not arise from fraud or gross or wilful neglect on the part of the assessee.

2. Ownership of Businesses:
The ITO concluded that the businesses carried on by certain individuals (Shri Ashok Kumar Barnwal, Smt. Kamla Devi, and Shri Hira Lal Barnwal) actually belonged to the assessee-HUF. The reasons included:
- The pawned goods were not found in the residential portion of the individuals.
- Only one Girvi Bahi was found, and it was written by an associate of the HUF.
- The individuals could not establish the source of their investments.
- The individuals' claims about their business activities were not substantiated by documentary evidence.

The Commissioner (Appeals), however, found no evidence linking the investments made by these individuals to the assessee-HUF. He noted that the family had been assessed on substantial incomes in the past, making it probable that the individuals had their own funds.

3. Admissibility of Additional Evidence:
The Commissioner (Appeals) considered additional evidence, including certificates from citizens and orders from the Tribunal in the cases of the individuals. The department argued that the Commissioner (Appeals) committed a legal error by not following the findings given by the Tribunal in the quantum assessment. The Tribunal held that penalty proceedings are separate from assessment proceedings and that fresh evidence can be admitted in penalty proceedings to show that the failure to return the correct income was not due to fraud or gross or wilful neglect.

4. Justification of Penalty Proceedings:
The Tribunal noted that penalty proceedings are quasi-criminal in nature, and the burden of proof lies on the revenue to establish that the assessee consciously concealed particulars of income or deliberately furnished inaccurate particulars. The Tribunal cited the Supreme Court's ruling in Anantharam Veerasinghaiah & Co. v. CIT, which held that findings in assessment proceedings cannot automatically be adopted in penalty proceedings. The Tribunal agreed with the Commissioner (Appeals) that the additional evidence showed that the businesses run by the individuals did not belong to the assessee-HUF, and thus, the penalty under section 271(1)(c) could not be sustained.

Conclusion:
The appeal was dismissed, and the Tribunal upheld the Commissioner (Appeals)'s decision to cancel the penalty imposed under section 271(1)(c). The Tribunal found that the businesses run by the individuals did not belong to the assessee-HUF, and the failure to return the correct income was not due to fraud or gross or wilful neglect. The additional evidence considered by the Commissioner (Appeals) was found to be admissible, and the penalty proceedings were not justified based on the findings in the assessment proceedings.