1994 (10) TMI 85 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty u/s 271(1)(c) for concealment of particulars of income.
2. Invocation of Explanation 1 to section 271(1)(c) by CIT(A).
3. Onus of proving mens rea in penalty proceedings.
4. Relevance of findings in assessment proceedings for penalty imposition.

Summary of Judgment:

1. Levy of Penalty u/s 271(1)(c) for Concealment of Particulars of Income:
The assessee, a private limited company, filed returns declaring losses for assessment years 1983-84 and 1984-85. The Assessing Officer (AO) noted increases in share capital and unsecured loans but the assessee failed to provide details despite multiple opportunities. Consequently, the AO made ex parte assessments and initiated penalty proceedings u/s 271(1)(c) for concealment of income.

2. Invocation of Explanation 1 to Section 271(1)(c) by CIT(A):
The CIT(A) confirmed the AO's penalty orders, invoking Explanation 1 to section 271(1)(c). The assessee contended that the AO did not invoke this Explanation in the penalty notices or orders, and only the AO could invoke it. The Tribunal agreed with the assessee, citing jurisdictional High Court judgments that the Explanation can only be applied if invoked by the AO at the time of issuing the notice.

3. Onus of Proving Mens Rea in Penalty Proceedings:
The assessee argued that without the application of Explanation 1, the onus was on the revenue to establish mens rea, as penalty proceedings are quasi-criminal. The Tribunal agreed, stating that the CIT(A) was wrong in holding that mens rea was not required, distinguishing the Supreme Court judgments cited by the CIT(A) as they were rendered in different contexts.

4. Relevance of Findings in Assessment Proceedings for Penalty Imposition:
The Tribunal examined whether the revenue discharged its burden of proving concealment. The assessee failed to disclose basic facts about the increase in share capital and unsecured loans during assessment and penalty proceedings. The Tribunal held that the assessee's withholding of information amounted to concealment. The details provided to the CIT(A) were insufficient to make a prima facie case that the receipts were not income. The Tribunal concluded that the assessee deliberately concealed particulars of income, justifying the penalty.

Conclusion:
The Tribunal dismissed the appeals for both years, upholding the penalties imposed by the AO and confirmed by the CIT(A).