1971 (12) TMI 9 - HC - Income Tax

Penalty - concealment of income - fact that the assessee had been guilty of concealment in past years cannot lead to the inference that he is guilty of concealment in the year in dispute. The past record of the assessee was not relevant for the purpose of deciding as to whether there has been such concealment as to warrant imposition of penalty. As has been seen, penalty proceedings being quasi-criminal in nature, the facts necessary to attract the penal provision of section 271 of the Act must be clearly proved in respect of each year.

Summary

Issues Involved:
1. Applicability of section 271/274 of the Income-tax Act, 1961.
2. Concealment of income or deliberate furnishing of inaccurate particulars under section 271(2).
3. Reduction of penalty under section 271(1)(c) from Rs. 70,000 to Rs. 5,000.

Detailed Analysis:

1. Applicability of Section 271/274 of the Income-tax Act, 1961:
The first question addressed whether the provisions of section 271/274 of the Income-tax Act, 1961, were applicable to the case. This question was not pressed by the counsel for the assessee in light of the Supreme Court's decision, and thus, the court answered it against the assessee.

2. Concealment of Income or Deliberate Furnishing of Inaccurate Particulars:
The second issue examined whether there was any material to warrant the finding that the assessee-company had concealed particulars of its income or deliberately furnished inaccurate particulars thereof within the meaning of section 271(2). The court noted that the Tribunal did not consider the relevant material evidence, specifically the statement of Sri Kedarnath Kanodia and the actual shortage value of Rs. 26,429 versus the claimed Rs. 1,34,661. The Tribunal also overlooked the fact that the assessee had agreed to the addition of Rs. 67,500 only after being confronted with conclusive evidence. The court held that the omission to consider these facts introduced a serious infirmity in the Tribunal's order, thus vitiating its finding. Therefore, the court concluded that the finding of no concealment by the Tribunal was incorrect in law.

3. Reduction of Penalty under Section 271(1)(c):
The third issue involved whether the Tribunal was correct in reducing the penalty from Rs. 70,000 to Rs. 5,000. The Tribunal's decision to reduce the penalty was based on the past conduct of the assessee, who had agreed to similar additions in previous years. However, the court held that the past record of the assessee was not relevant for deciding concealment for the current year. Penalty proceedings being quasi-criminal in nature require clear proof of facts necessary to attract the penal provision of section 271 for each year independently. The court found that the Tribunal's reliance on past conduct was unjustified, and the finding of concealment for the amount of Rs. 48,500 was not legally supported. Consequently, the court answered the third question in the affirmative and against the assessee.

Conclusion:
The court answered the first question in the negative and in favor of the department, the second question in the negative and in favor of the assessee, and the third question in the affirmative and against the assessee. The costs were assessed at Rs. 200, considering the partial success and failure of both parties.