1997 (7) TMI 205 - AT - Income Tax

Agricultural Income, Assessing Officer, Assessment Year, In Part, Levy Of Penalty, Penalty Proceedings, Search And Seizure, Total Income

Summary

Issues Involved:

1. Levy of penalty under section 271(1)(c) for the assessment year 1984-85.
2. Applicability of Explanation 1 to section 271(1)(c).
3. Consideration of the assessee's explanation and its bona fides.
4. Impact of the petition under section 273A on penalty proceedings.
5. The legal burden of proof in penalty proceedings.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) for the Assessment Year 1984-85:

The Assessing Officer (AO) imposed a penalty of Rs. 10,44,016 under section 271(1)(c) for concealing particulars of income or furnishing inaccurate particulars of income amounting to Rs. 15,54,194. The CIT(Appeals) excluded amounts disclosed in the assessee's petition under section 273A and agricultural income, confirming the penalty for concealed income of Rs. 5,73,044. The Tribunal upheld the CIT(Appeals)'s decision, emphasizing that the assessee did not make a full and true disclosure of income and the concealment was evident from unexplained deposits and investments.

2. Applicability of Explanation 1 to Section 271(1)(c):

The Tribunal considered Explanation 1 to section 271(1)(c), which shifts the burden of proof to the assessee. If the assessee fails to offer a satisfactory explanation or the explanation is found to be false, the income added or disallowed is deemed to be concealed income. The Tribunal cited various precedents, including the Orissa High Court's decision in CIT v. Prathi Hardware Stores, to support the application of Explanation 1, emphasizing that the burden is on the assessee to rebut the presumption of concealment.

3. Consideration of the Assessee's Explanation and its Bona Fides:

The assessee argued that the additions were made on an agreed basis and that no penalty should be levied. The Tribunal rejected this argument, noting that the assessee did not provide a credible explanation for the unexplained deposits and investments. The Tribunal highlighted that the assessee's explanation must be bona fide and substantiated with material evidence, which was not the case here. The Tribunal referred to decisions such as CIT v. Krishna & Co. and CIT v. K. Govindarajulu Naidu to emphasize that mere agreement to additions does not absolve the assessee from penalty if the explanation is not credible.

4. Impact of the Petition under Section 273A on Penalty Proceedings:

The assessee contended that the petition under section 273A should influence the penalty proceedings. The Tribunal disagreed, stating that the disclosure in the petition under section 273A did not cover the entire amount of concealed income. The Tribunal noted that the assessee did not declare the income of Rs. 9,66,150 disclosed in the petition in the return filed after the search, nor did it disclose the additional unexplained deposits and investments. The Tribunal concluded that the petition under section 273A had no bearing on the penalty for the undisclosed amount of Rs. 5,73,044.

5. The Legal Burden of Proof in Penalty Proceedings:

The Tribunal emphasized that the burden of proof in penalty proceedings, especially after the insertion of Explanation 1 to section 271(1)(c), lies on the assessee. The Tribunal cited the Supreme Court's decision in Chuharmal v. CIT and other relevant cases to underline that the assessee must provide a credible and substantiated explanation to rebut the presumption of concealment. The Tribunal concluded that the assessee failed to discharge this burden, leading to the confirmation of the penalty.

Conclusion:

The Tribunal dismissed the appeal, confirming the penalty under section 271(1)(c) for the assessment year 1984-85. The Tribunal held that the assessee concealed particulars of income and furnished inaccurate particulars, failing to provide a credible explanation for the unexplained deposits and investments. The Tribunal's decision was based on the application of Explanation 1 to section 271(1)(c) and the legal precedents emphasizing the burden of proof on the assessee in penalty proceedings.