1971 (3) TMI 2 - HC - Income Tax

Penalty - credit entries in the names of the wives of two members - concealment of income - it is for the department to prove that the receipt of the amount was the assessee s income to impose penalty for concealment of income

Summary

Issues:
1. Justification of penalty under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The judgment pertains to an application under section 66(2) of the Indian Income-tax Act, 1922, by the Commissioner of Income-tax, U. P. Lucknow, involving the imposition of a penalty on a Hindu undivided family for alleged concealment of income. The Income-tax Officer had treated a sum of Rs. 25,168 as undisclosed income of the assessee, originating from credit entries in the accounts of two family members' wives. Despite the assessee's explanation supported by Parchas and an affidavit, the Income-tax Officer imposed a penalty. The Tribunal, however, allowed the assessee's appeal, stating that the explanation provided by the assessee was prima facie believable and the burden of proof had not been discharged by the department to establish concealment of income. The Tribunal's finding was based on a thorough appraisal of the material on record, concluding that the penalty was not justified.

The Commissioner of Income-tax contended that certain circumstances, including the unreliability of a witness, were not adequately considered by the Tribunal. However, the High Court held that the Tribunal, being the final fact-finding authority, had appropriately evaluated the evidence and found the department's evidence insufficient to prove concealment of income. The Court referenced legal precedents, such as Commissioner of Income-tax v. Anwar Ali, emphasizing that the burden lies on the department to establish the disputed amount as taxable income and prove deliberate concealment. The Court further highlighted that unsatisfactory explanations alone do not lead to the inference of concealed income. Referring to other cases, the Court reiterated the principles laid down by the Supreme Court in Anwar Ali's case regarding the burden of proof on the income-tax department in penalty cases.

Ultimately, the Court dismissed the Commissioner's application, stating that the Tribunal's finding was based on a correct interpretation of the law and sufficient consideration of the evidence. The Court emphasized that the question raised did not warrant a reference as it was a factual determination within the Tribunal's purview. As the assessee was not present during the proceedings, no costs were awarded, and the counsel's fee was assessed at Rs. 100.