1987 (5) TMI 85 - AT - Income Tax

Issues Involved:

1. Imposition of penalties u/s 271(1)(c) for assessment years 1975-76 to 1979-80.
2. Alleged inflation of hire charges paid to lorry owners.
3. Reopening of assessments based on inquiries.
4. Settlement request by the assessee and its implications.
5. Penalty proceedings and assessee's explanation.
6. Examination of evidence and cross-examination requests.
7. Legal standards and burden of proof in penalty proceedings.

Summary:

1. Imposition of penalties u/s 271(1)(c) for assessment years 1975-76 to 1979-80:
The assessee filed appeals against the orders confirming the imposition of penalties u/s 271(1)(c) for the assessment years 1975-76 to 1979-80. The penalties imposed and confirmed were as follows: 1975-76: Rs. 1,43,400; 1976-77: Rs. 2,23,880; 1977-78: Rs. 43,824; 1978-79: Rs. 5,192; 1979-80: Rs. 1,36,777.

2. Alleged inflation of hire charges paid to lorry owners:
The Income-tax Officer (ITO) conducted inquiries revealing that the assessee had allegedly inflated hire charges paid to lorry owners. Consequently, the assessments for 1975-76 to 1977-78 were reopened, and the incomes assessed in the reopened proceedings amounted to Rs. 41,40,452.

3. Reopening of assessments based on inquiries:
The ITO obtained various schedules of rates and contacted lorry owners who had deputed their lorries for transportation of sugar. Inquiries revealed that the assessee had allegedly inflated hire charges, leading to the reopening of assessments.

4. Settlement request by the assessee and its implications:
The assessee approached the Commissioner, Central, Karnataka, for an amicable settlement and agreed to the solution offered by the CIT, Central, to avoid protracted proceedings. The CIT directed that inflation in hire charges paid may be taken at a sum of Rs. 50 per lorry per trip.

5. Penalty proceedings and assessee's explanation:
The ITO issued notices for levying penalties u/s 274 read with section 271 for concealment of income. The assessee firm filed a written explanation stating that they had not inflated any lorry freights and agreed to the solution offered by the CIT, Central, to avoid protracted proceedings, not due to any concealment. The ITO rejected the explanation and imposed penalties.

6. Examination of evidence and cross-examination requests:
The ITO relied on statements from lorry owners, but the assessee firm was not given an opportunity to cross-examine them. The Tribunal noted that the evidence from lorry owners was not direct, and many did not maintain account books. The assessee's request for cross-examination was not conceded, violating principles of natural justice.

7. Legal standards and burden of proof in penalty proceedings:
The Tribunal referred to the legal position that penalty proceedings are penal in nature, and the burden is on the department to prove conscious concealment of income. The Tribunal held that the assessee was not guilty of any concealment, much less deliberate or conscious concealment. The evidence on record did not establish that the freight charges recorded were false or concocted.

Conclusion:
The Tribunal concluded that the department failed to establish that the assessee consciously concealed its income by inflating lorry freight charges. Consequently, the penalties for all five assessment years were cancelled, and the appeals were allowed.

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