1980 (4) TMI 2 - SC - Income Tax

Cash credits - assessee s explanation that the excess expenditure was met from amounts deposited with him by some shop-keepers but not entered in his books was not accepted - as the HC should not have rendered findings of fact, we vacate the findings of fact reached by the HC, without expressing any opinion on their correctness, leaving it to the Appellate Tribunal in exercise of its duty under s. 260(1) to take up the appeal and to redetermine it conformably to this judgment

Summary

Issues:
Scope of s. 271(1)(c) of the I.T. Act, 1961; Burden of proof in penalty proceedings; Consideration of all relevant facts and circumstances in penalty proceedings; Applicability of legal principles in the application of s. 271(1)(c); Authority of the Appellate Tribunal to find facts.

Analysis:
The judgment by the Supreme Court dealt with an appeal against the judgment of the Andhra Pradesh High Court regarding the scope of s. 271(1)(c) of the I.T. Act, 1961. The case involved an abkari contractor who had discrepancies in the disclosed income leading to penalty proceedings under s. 271(1)(c). The Income Tax Officer (ITO) rejected the assessee's explanations for excess expenditures and cash deposits, estimating the income at Rs. 5,00,018. However, the Appellate Tribunal reduced the assessed income to Rs. 1,30,000, leading to the penalty imposition of Rs. 75,000 by the Income-tax Appellate Tribunal (IAC). The Appellate Tribunal later set aside the penalty order made by the IAC, leading to the reference of the question to the High Court.

The High Court held that the Appellate Tribunal was not justified in holding that no penalty was leviable. The Supreme Court analyzed the legal principles involved in the application of s. 271(1)(c), emphasizing that the burden of proof in penalty proceedings lies on the revenue to establish that the disputed amount represents income and that the assessee has concealed the particulars of income or furnished inaccurate particulars. The Court highlighted that the entirety of circumstances must be considered to determine if the disputed amount represents income and if the assessee has concealed particulars. The Court reiterated that the burden of proof in a penalty proceeding is different from that in an assessment proceeding.

The Appellate Tribunal's reliance on an intangible addition made to the book profits of the assessee in a previous year was deemed erroneous by the Supreme Court. The Court emphasized that the mere availability of a previously earned undisclosed income does not automatically imply that it is the source of unexplained expenditure in a subsequent year. The Court outlined that each case must be examined based on the particular facts and circumstances to ascertain the true nature of cash deficits and credits. The High Court's findings of fact were vacated by the Supreme Court, leaving it to the Appellate Tribunal to redetermine the case in line with the legal principles laid down in the judgment.

In conclusion, the Supreme Court endorsed the High Court's opinion that the question referred must be answered in the negative due to the erroneous legal basis of the Appellate Tribunal's finding. The Court directed the Appellate Tribunal to reexamine the case in accordance with the judgment and principles outlined, emphasizing the authority of the Tribunal to find facts in the matter. The appeal was disposed of with no order as to costs.