1998 (5) TMI 42 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of Explanation 5 to Section 271(1)(c) of the Income-tax Act.
2. Justification for the penalty levied under Section 271(1)(c).
3. The burden of proof in penalty proceedings under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Applicability of Explanation 5 to Section 271(1)(c):
The primary issue was whether Explanation 5 to Section 271(1)(c) was applicable in this case. The Explanation enacts a deeming provision applicable where an assessee is found to be the owner of any unexplained asset during a search under Section 132. The Tribunal noted that no search warrant was issued in the name of the assessee, and no Panchnama was drawn in her name. Therefore, Explanation 5 was deemed inapplicable as the basic statutory requirement of a search warrant in the assessee's name was not fulfilled. The Third Member confirmed that Explanation 5 did not apply since the search was conducted under a warrant issued in the name of the assessee's husband and father-in-law, not the assessee herself.

2. Justification for the Penalty Levied under Section 271(1)(c):
The Assessing Officer levied a penalty of Rs. 81,082 under Section 271(1)(c), invoking Explanation 5, on the grounds that the assessee had concealed particulars of income. The CIT(A) deleted the penalty, stating that no concealment was detected and the surrender of Rs. 1,00,833 was made "for buying peace." The Judicial Member reversed the CIT(A)'s decision, arguing that the concealment was established due to contradictions in the assessee's statements and the unexplained nature of the cash found. However, the Accountant Member disagreed, emphasizing that the penalty provisions under Explanation 5 were not applicable, and the surrender was made under adverse personal circumstances to avoid litigation. The Third Member concurred with the Accountant Member, holding that the mere surrender to buy peace did not amount to an admission of concealment.

3. The Burden of Proof in Penalty Proceedings under Section 271(1)(c):
The Tribunal discussed the burden of proof in penalty proceedings, noting that penalty proceedings are quasi-criminal in nature and the burden of proof lies on the department to establish concealment. The Accountant Member and the Third Member held that since the Assessing Officer did not specifically invoke any other Explanation (1 to 4) to Section 271(1)(c), the issue had to be adjudicated based on the substantive provisions of Section 271(1)(c). The Third Member further clarified that the burden of proof under Explanation 1 to Section 271(1)(c) shifts to the assessee to offer a bona fide explanation. The Third Member concluded that the assessee's explanation was bona fide and reasonable, and there was no evidence of deceitful intent. Therefore, the penalty under Section 271(1)(c) was not justified.

Conclusion:
The Third Member confirmed the view of the Accountant Member, holding that Explanation 5 to Section 271(1)(c) was not applicable, and the penalty levied under Section 271(1)(c) was not justified. The matter was referred back to the Division Bench for passing an order in accordance with the majority opinion.