1984 (8) TMI 125 - AT - Income Tax

Summary

Issues:
Levy of penalty under section 271(1)(c) - Discrepancy in income declared and assessed - Disbelief of deposits made by the assessee - Failure to discharge onus of explanation.

Analysis:
The judgment revolves around the appeal against the penalty imposed under section 271(1)(c) of the Income Tax Act. The assessee, a partner in a trading firm, declared a share loss and small insurance commission income. However, the Income Tax Officer (ITO) assessed the income at a higher amount, mainly due to the disbelieved deposits made by the assessee in the trading firm. The ITO levied a penalty of Rs. 50,000, which was later reduced to Rs. 37,000 by the Commissioner of Income Tax (Appeals) (CIT(A)).

The main contention before the CIT(A) was that the ITO's disbelief of the deposits was not sufficient to conclude that the assessee had concealed income. However, the CIT(A) held that the case fell under the Explanation to section 271(1)(c), shifting the onus of proof onto the assessee, which the assessee failed to discharge.

During the appeal hearing, the assessee's counsel argued that the earlier assessment was set aside by the Appellate Assistant Commissioner (AAC), and the subsequent assessment was based on the AAC's directions. The assessee had explained that the deposits were made from withdrawals from other firms, but the necessary account books were not made available for inspection.

Regarding individual deposits, various explanations were provided by the assessee, such as withdrawals from other sources and loans from individuals. The assessee argued that he had discharged his onus under the Explanation to section 271(1)(c) by providing plausible explanations, citing precedents where penalties were not levied when doubts were raised by the assessee.

The Revenue relied on precedents where penalties were upheld due to the failure of the assessee to provide further evidence or explanations during the penalty proceedings. However, the Tribunal distinguished the facts of the case from those precedents and held that the assessee had discharged the onus of proof, thereby allowing the appeal and overturning the penalty.

In conclusion, the Tribunal allowed the appeal, emphasizing that in the circumstances of the case, the assessee had successfully discharged the onus, and no penalty under section 271(1)(c) or its Explanation was justified.