1970 (3) TMI 44 - HC - Income Tax

Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in cancelling the penalty levied under section 28(1)(c) of the Income-tax Act, 1922

Summary

Issues:
1. Application under section 256(2) of the Income-tax Act, 1961, read with section 66(2) of the Income-tax Act, 1922, for direction requiring the Income-tax Appellate Tribunal to state the case and refer the questions of law.
2. Justification of canceling the penalty levied under section 28(1)(c) of the Income-tax Act, 1922.
3. Determination of whether positive evidence for 'concealment or furnishing of inaccurate particulars' is necessary in all cases or whether such a conclusion can be arrived at by fair inference from the material on record.

Analysis:
The judgment delivered by the High Court of Madhya Pradesh pertains to an application seeking a direction for the Income-tax Appellate Tribunal to state the case and refer questions of law arising from an order dated January 22, 1965. The primary issues revolved around the cancellation of a penalty levied under section 28(1)(c) of the Income-tax Act, 1922. The Tribunal had canceled the penalty, prompting the Commissioner to argue that the questions of law should be referred to the court for decision.

In the case, the assessee, engaged in sarafi business, had a credit entry of Rs. 12,409 in his account books, which the Income-tax Officer treated as income from undisclosed sources due to lack of evidence proving the genuineness of the transaction. The Appellate Assistant Commissioner and the Tribunal upheld this addition as income. Simultaneously, penalty proceedings were initiated under section 28(1)(c), resulting in a penalty of Rs. 8,600 imposed by the Income-tax Officer, which was later canceled by the Tribunal.

The Tribunal's decision to cancel the penalty was based on the absence of positive evidence indicating concealment or furnishing of inaccurate particulars by the assessee. The court highlighted that the revenue failed to provide any positive circumstances on record supporting the inference of concealment or deliberate furnishing of inaccurate particulars. The judgment emphasized that the Tribunal was justified in its decision, citing precedent and holding that no positive circumstances warranted the necessary inference to attract the penalty provisions under section 28(1)(c) of the Income-tax Act, 1922.

Furthermore, the court referenced a previous decision to support the Tribunal's stance and rejected the application for reference, emphasizing that the question of concealment of income is primarily a factual inquiry. The judgment concluded by rejecting the application for reference and imposing costs, highlighting the correctness of the Tribunal's decision in the matter.