1971 (1) TMI 43 - HC - Income Tax

Penalty - concealment of income - merely because the assessee s explanation is not acceptable to the department it cannot be said that the assessee had concealed his income to invite penalty for concealment

Summary

Issues:
Penalty imposition under section 28(1)(c) of the Income-tax Act, 1922 based on alleged concealment of income and accuracy of stock maintenance.

Analysis:
The case involved the imposition of a penalty on an assessee, a registered firm engaged in grain commission agency, speculation, and business on its own account, for discrepancies in stock accounts and alleged concealment of income. The Income-tax Officer found that the assessee had pledged goods to the bank in excess of what was recorded in its stock accounts, leading to a determination of excessive stocks valued at Rs. 25,406. The assessee provided explanations for the discrepancies, attributing them to naming errors by bank authorities, pledging of stocks belonging to another individual, and a general practice of declaring excess grain. Despite the explanations, the Income-tax Officer imposed a penalty of Rs. 15,000, later reduced to Rs. 8,000 by the Appellate Assistant Commissioner.

Upon further appeal, the Tribunal considered whether the discrepancies and non-acceptance of explanations warranted the imposition of a penalty under section 28(1)(c) of the Income-tax Act, 1922. The Tribunal concluded that the mere rejection of the assessee's explanation did not establish concealment of income, emphasizing the absence of positive evidence linking the discrepancies to deliberate concealment. The Tribunal referenced the case law of Commissioner of Income-tax v. Anwar Ali, highlighting the requirement for cogent material evidence beyond the falsity of explanations to justify penalty imposition for concealment of income.

The High Court concurred with the Tribunal's reasoning, holding that the certificate from the bank indicating excess pledging of goods did not conclusively prove inaccurate stock maintenance or deliberate concealment of income. The Court emphasized the lack of substantial evidence establishing the guilt of the assessee, thereby upholding the Tribunal's decision that penalty imposition was unwarranted. The Court's decision was based on the principle that without concrete evidence of intentional concealment, penalties under section 28(1)(c) could not be levied. Consequently, the Court answered the question referred in the affirmative, affirming the Tribunal's decision.