1985 (6) TMI 84 - AT - Income Tax

Summary

Issues Involved:
1. Concealment of income from the sale of timber.
2. Justification for penalty under Section 271(1)(c) of the Income Tax Act, 1961.
3. Bona fide belief regarding the nature of income from timber sales.

Issue-Wise Detailed Analysis:

1. Concealment of Income from the Sale of Timber:

The ITO discovered that the assessee had sold timber worth Rs. 50,000 during the assessment year, which was not disclosed in the return of income or the accompanying statements. The assessment was completed with an additional short-term capital gain of Rs. 15,000 from the sale of timber. The AAC later reduced the total income, and the Tribunal further adjusted the income from the timber sale to Rs. 45,000. The ITO issued a notice under Section 274 read with Section 271(1)(c) for concealment of income, leading to a penalty of Rs. 13,500.

2. Justification for Penalty under Section 271(1)(c):

The assessee argued that there was no concealment as the sale value of timber was disclosed and believed to be non-taxable. The AAC, however, concluded that the appellant did not disclose the capital gains from timber sales in the return or wealth statements, and only revealed the sale when confronted by the ITO. The AAC upheld the penalty, agreeing with the ITO's reliance on precedents like India Sea Foods vs. CIT and Addl. CIT vs. E. Bhoopathy.

3. Bona Fide Belief Regarding the Nature of Income from Timber Sales:

The assessee contended that the timber sales were considered agricultural proceeds and thus not liable for capital gains tax. It was argued that the sale was disclosed in the statement attached to the return of income, which mentioned the discharge of a liability from timber sales. The Tribunal noted that the penalty proceedings are independent and penal in nature, requiring the Department to prove concealment. The Tribunal found that the assessee had disclosed the sale of timber in the return and could have reasonably believed the proceeds to be non-taxable.

Conclusion:

The Tribunal held that the assessee had disclosed the timber sale in the return of income and could have had a bona fide belief that the proceeds were not subject to capital gains tax. Consequently, it was determined that the assessee did not conceal income or furnish inaccurate particulars, leading to the cancellation of the penalty under Section 271(1)(c). The appeal filed by the assessee was allowed.