1969 (7) TMI 14 - HC - Income Tax

Summary

Issues:
Validity of penalty under section 28(1)(c) of the Income-tax Act, 1922 based on concealment of income or furnishing inaccurate particulars.

Detailed Analysis:

The case involved a Hindu undivided family where credits appeared in the cash book, which the assessee claimed belonged to certain individuals. The Income-tax Officer imposed a penalty under section 28(1)(c) of the Income-tax Act, 1922, for alleged concealment of income. The Tribunal reduced the penalty but based its decision solely on the assessment proceeding's conclusion without additional evidence of concealment or inaccurate particulars.

The key legal provision in question, section 28(1)(c) of the Income-tax Act, 1922, allows for the imposition of a penalty if an individual conceals income or furnishes inaccurate particulars. However, sub-sections (3) and (4) of section 28 emphasize the need for a separate penalty proceeding after the assessment is completed, giving the assessee a chance to be heard.

The judgment discussed conflicting views on the nature of penalty proceedings. One view, supported by various High Court decisions, treats penalty proceedings as quasi-criminal, placing the onus on the department to prove concealment. This approach requires additional evidence beyond the assessment proceeding's conclusions to establish concealment or inaccurate particulars.

Contrary to this view, some judgments, including those from the Allahabad High Court, interpret penalty proceedings as akin to assessment proceedings, placing the burden on the assessee. However, the High Court in this case endorsed the former view, aligning with the Bombay High Court's stance that penalty proceedings are quasi-criminal, necessitating proof of concealment by the department.

The judgment concluded that the Tribunal's decision to impose a penalty lacked sufficient evidence of concealment beyond the assessment proceeding's findings. Merely rejecting the assessee's explanation in the assessment does not prove concealment. As such, the penalty under section 28(1)(c) was deemed invalid in this case, emphasizing the need for concrete evidence in penalty proceedings to establish concealment or furnishing inaccurate particulars.

In agreement with the above analysis, the High Court ruled that the penalty under section 28(1)(c) was not validly imposed in this case due to the lack of additional evidence supporting the concealment of income. The reference was answered accordingly, highlighting the importance of meeting the burden of proof in penalty proceedings.