1984 (6) TMI 113 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of the cash credits.
2. Applicability of Explanation 1(A) to section 271(1)(c).
3. Burden of proof in penalty proceedings.
4. Whether the penalty under section 271(1)(c) was legally justified.

Issue-wise Detailed Analysis:

1. Legitimacy of the Cash Credits:
The Income Tax Officer (ITO) identified cash credits aggregating to Rs. 95,000 in the account of Shri Sukhbir Singh and questioned the assessee about their nature and source. Despite the assessee's evidence, the ITO found the loans to be fictitious, concluding that Sukhbir Singh never advanced any loan and the interest payments were not genuine. The ITO added Rs. 95,000 to the assessee's income from undisclosed sources, completing the assessment at Rs. 1,00,617 and initiating penalty proceedings under section 271(1)(c).

2. Applicability of Explanation 1(A) to Section 271(1)(c):
The assessee argued that Explanation 1(A) to section 271(1)(c), effective from the assessment year 1976-77, was inapplicable for the assessment year 1975-76. The ITO had imposed the penalty based on this explanation, which the assessee claimed was legally incorrect. However, the Tribunal noted that the ITO's mention of Explanation 1(A) was a clerical mistake and did not invalidate the penalty, as the substance of the ITO's application of section 271(1)(c) was correct.

3. Burden of Proof in Penalty Proceedings:
The assessee contended that the department failed to prove that the sum of Rs. 95,000 was income of the assessee and that the assessee knowingly concealed it. The Tribunal held that under the Explanation to section 271(1)(c), the burden of proof initially lies on the assessee to rebut the presumption of concealment. The Tribunal found that the assessee failed to discharge this burden, as the evidence showed that the loans were bogus and the creditor never advanced the loans.

4. Whether the Penalty Under Section 271(1)(c) Was Legally Justified:
The Tribunal reviewed the ITO's findings and the Commissioner's (Appeals) decision, concluding that the penalty under section 271(1)(c) was justified. The Tribunal noted that the assessee's conduct and the evidence indicated that the cash credits were not genuine and that the assessee had perpetuated a false story. The Tribunal dismissed the appeal, affirming that the penalty was correctly imposed.

Conclusion:
The Tribunal upheld the ITO's decision to impose a penalty under section 271(1)(c) for the concealment of income, finding that the assessee failed to prove the genuineness of the cash credits and that the penalty was legally justified despite the clerical error in citing Explanation 1(A). The appeal was dismissed, confirming the penalty.