1982 (6) TMI 101 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of cash credits in the assessee's books.
2. Justification for penalty under section 271(1)(c) for concealment of income.
3. Burden of proof for concealment and imposition of penalty.

Detailed Analysis:

1. Legitimacy of Cash Credits:
The Income Tax Officer (ITO) did not believe the cash credits appearing in the books of the assessee, which included Rs. 10,000 from Mathra Dass, Rs. 2,000 from Panna Lal Shiv Shankar, and Rs. 12,000 from Sukhinder Singh. The Appellate Assistant Commissioner (AAC) confirmed the total addition of Rs. 24,000. However, the Tribunal later deleted the addition of Rs. 2,000 pertaining to Panna Lal Shiv Shankar.

2. Justification for Penalty under Section 271(1)(c):
The ITO initiated proceedings under section 271(1)(c) and levied a penalty of Rs. 24,000 for concealment of income. The AAC cancelled this penalty, which was disputed by the Revenue. The Revenue argued that the explanation provided by Mathra Dass was false and that the ITO had sufficient material to prove the falsity of the assessee's submissions. The Revenue contended that no additional material was necessary to sustain the penalty once the amount was subjected to tax under section 68.

3. Burden of Proof for Concealment and Imposition of Penalty:
The assessee's counsel argued that it was the first year of the assessee's business and that the capital introduced was only Rs. 10,000. The counsel also pointed out that the Tribunal had already deleted Rs. 2,000 and that the remaining amounts were either introduced at the beginning of the accounting year or were related to verifiable transactions. The counsel emphasized that the assessment had not been crystallized into a final determination of assessed income when the penalty was levied.

The Tribunal noted that Mathra Dass and Sukhinder Singh were produced before the ITO and admitted to having advanced the amounts. The Tribunal found that the ITO did not consider Mathra Dass as a man of means and declined to accept the assessee's explanation regarding the supply of cloth to Sukhinder Singh. The Tribunal also observed that the mere rejection of the assessee's explanation was not sufficient to warrant the levy of a penalty for concealment under section 271(1)(c).

Conclusion:
The Tribunal concluded that the AAC's action in cancelling the penalty was justified. The Tribunal emphasized that the assessment and penalty proceedings are distinct and that the rejection of the assessee's explanation may warrant an addition in the case of cash credits but is not sufficient to impose a penalty for concealment. The Tribunal also noted that the burden of proof lies with the Revenue to establish that the assessee consciously concealed particulars of income or deliberately furnished inaccurate particulars. The Tribunal dismissed the Revenue's appeal, confirming the AAC's order to cancel the penalty.

Result:
The Revenue's appeal was dismissed.