1984 (3) TMI 160 - AT - Income Tax

Summary

Issues:
Challenge to deletion of penalty under section 271(1)(c) of the IT Act, 1961 based on concealment.

Analysis:
The Department appealed against the deletion of a penalty of Rs. 7,009 imposed by the ITO on the assessee for concealment under section 271(1)(c) of the IT Act, 1961. The penalty was initiated after the auditors of the firm reported that the assessee had realizations of Rs. 7,000 but could not provide details to appropriate them against debtors' balances. The ITO added this amount to the total income and imposed the penalty, stating the assessee's explanation was unsatisfactory. However, the ld. AAC deleted the penalty, noting that concealment was not proven, emphasizing that the lack of evidence should not automatically imply guilt.

The Revenue contended that the ITO had valid reasons for rejecting the assessee's explanation and argued that the penalty should have been upheld. On the other hand, the assessee supported the decision of the ld. AAC. The ITAT observed that the Explanation to section 271(1)(c) did not apply in this case as the allegedly concealed income was less than 20% of the returned income. Referring to the Supreme Court decision in CIT vs. Anwar Ali, the onus was on the Revenue to prove concealment, which they failed to do. The ITAT found no positive material to establish the concealed amount as income of the assessee for the relevant year.

Moreover, the ITAT highlighted that even though the assessee's explanation lacked evidence, it was still probable. The ITO's main reason for treating the amounts as unexplained income and imposing the penalty was the lack of corroborative evidence. While this might justify additions to the total income, for penalty imposition, absolute proof is not necessary. The ITAT concluded that the penalty was not warranted as the assessee's explanation was plausible, fulfilling the civil nature of the burden of proof under the Explanation to section 271(1)(c). Consequently, the ITAT upheld the ld. AAC's decision and dismissed the Departmental appeal.