1980 (6) TMI 67 - AT - Income Tax

Summary

Issues:
1. Imposition of penalty under section 271(1)(c) of the IT Act, 1961.
2. Jurisdiction of the IAC in levying penalty.
3. Burden of proof in penalty proceedings.

Analysis:

Issue 1: Imposition of penalty under section 271(1)(c) of the IT Act, 1961:
The appeal pertains to the imposition of a penalty of Rs. 75,000 on the assessee for the assessment year 1974-75 under section 271(1)(c) of the IT Act, 1961. The penalty was imposed due to the re-assessment proceedings where an amount of Rs. 50,000 was treated as income from undisclosed sources based on alleged hawala transactions. The IAC held that the assessee had concealed income and imposed the penalty.

Issue 2: Jurisdiction of the IAC in levying penalty:
The assessee challenged the jurisdiction of the IAC to levy the penalty, citing the deletion of section 274(2) of the IT Act, 1961, effective from April 1, 1975. The assessee argued that the onus of proving concealment lies on the department, not the assessee. Additionally, the Tribunal had previously canceled the re-assessment proceedings related to the case, rendering the penalty order invalid. The Tribunal held that the IAC lacked jurisdiction to levy the penalty due to the deletion of section 274(2).

Issue 3: Burden of proof in penalty proceedings:
The Tribunal emphasized that penalty proceedings are penal in nature, and the department must establish that the disputed amount constitutes income of the assessee and that there was a deliberate concealment or furnishing of inaccurate particulars. The Tribunal cited a Supreme Court decision stating that penalty cannot be solely based on reasons given in the original assessment order. As the department failed to provide cogent evidence of deliberate concealment, the Tribunal canceled the penalty levied on the assessee.

In conclusion, the Tribunal found in favor of the assessee, canceling the penalty imposed by the IAC due to lack of jurisdiction and insufficient evidence of deliberate concealment. The appeal by the assessee was allowed, and the penalty was deemed canceled.