1970 (9) TMI 17 - HC - Income Tax

Whether there is any evidence or material on record to support a finding that the sum of Rs. 20, 000 represents concealed income of the assessee of the previous year 1954-55 within the meaning of section 271(1)(c)

Summary

Issues Involved:
1. Whether there is any evidence or material on record to support a finding that the sum of Rs. 20,000 represents concealed income of the assessee for the previous year 1954-55 within the meaning of section 271(1)(c) of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Evidence or Material Supporting Concealed Income
The primary question referred to the High Court was whether there was any evidence or material on record to support the finding that Rs. 20,000 represented concealed income of the assessee for the previous year 1954-55 under section 271(1)(c) of the Income-tax Act, 1961.

Assessment Proceedings:
- The assessee, engaged in the foodgrains business, had a cash credit of Rs. 20,000 dated 5-2-1130 (M.E.) in his head office accounts, which was not satisfactorily explained.
- The assessee claimed the amount was transferred from his Kottayam branch, but the Income-tax Officer found the branch's cash balance insufficient on that date.
- The Income-tax Officer treated the amount as income from "other sources" for the assessment year 1956-57.
- On appeal, the Appellate Assistant Commissioner held that the sum could only be assessed in the assessment year 1955-56.

Reassessment Proceedings:
- The Income-tax Officer initiated reassessment for 1955-56, rejecting the assessee's explanations regarding the source of Rs. 20,000.
- The explanations included a transfer from the Kottayam branch and a share from a firm assessed on undisclosed income.
- The Income-tax Officer included the Rs. 20,000 as income from "other sources" and initiated penalty proceedings under section 271(1)(c).

Penalty Proceedings:
- The Inspecting Assistant Commissioner imposed a penalty of Rs. 13,437, relying on the rejection of the assessee's explanation during assessment proceedings.
- The Tribunal confirmed the penalty, dismissing the assessee's appeal.

High Court's Analysis:
- The High Court examined whether the explanation added to section 271(1) by the Finance Act, 1964, applied to the case.
- The court noted that the amendments, effective from April 1, 1964, did not apply to concealments before that date, including the present case related to the assessment year 1956-57.
- The court emphasized that penalty proceedings are penal in nature, requiring the department to establish the offence of concealment with evidence.
- The Tribunal had not independently considered the facts but relied on the rejection of the assessee's explanation.
- The court highlighted that the falsity of the assessee's explanation alone does not prove concealment; there must be evidence of income derived during the relevant period.

Conclusion:
- The High Court found no evidence, apart from the rejected explanation, to infer that Rs. 20,000 was income derived by the assessee during the relevant accounting period.
- The finding of concealment by the Tribunal was unsustainable in law.
- The court answered the question in the negative, in favor of the assessee, and against the department.

Final Judgment:
- The question referred was answered in the negative, indicating that the sum of Rs. 20,000 did not represent concealed income of the assessee for the previous year 1954-55 within the meaning of section 271(1)(c) of the Income-tax Act, 1961.