1972 (1) TMI 36 - HC - Income Tax

Credits in assessee s accounts were treated as his undisclosed income - whether the penalty has been rightly imposed under section 271(1)(c) read with section 274(2) of the Income-tax Act 1961.

Summary

Issues:
Whether penalty imposed under section 271(1)(c) read with section 274(2) of the Income-tax Act, 1961 was rightly imposed.

Analysis:

The judgment concerns the imposition of a penalty under section 271(1)(c) read with section 274(2) of the Income-tax Act, 1961 for the assessment year 1964-65. The case revolved around the authenticity of two borrowed amounts of Rs. 20,000 and Rs. 25,000 from a creditor named Mohan Dass. The Income-tax Officer raised suspicions due to discrepancies in the evidence provided by the assessee regarding the loans. Despite efforts to verify the transactions, including cross-examining Mohan Dass, it was revealed that Mohan Dass had not declared any income from money-lending in previous years and had made contradictory statements in other income-tax cases. Consequently, the Income-tax Officer concluded that the amounts were bogus entries and added Rs. 45,000 to the assessee's income for taxation.

The assessee's appeals to the Appellate Assistant Commissioner and the Appellate Tribunal were unsuccessful. Simultaneously, penalty proceedings were initiated, and the Inspecting Assistant Commissioner determined that the assessee had concealed income deliberately, imposing a penalty of Rs. 27,037. The Tribunal upheld this decision, prompting the assessee to challenge the penalty imposition alone, not the assessment.

The core argument presented by the assessee's counsel relied on the Supreme Court's decision in Commissioner of Income-tax v. Anwar Ali. The counsel contended that without concrete evidence of deliberate income concealment, the penalty under section 271(1)(c) could not be justified. However, the High Court distinguished the present case from Anwar Ali's case, emphasizing that efforts were made to verify the authenticity of the transactions, and Mohan Dass's conduct indicated a pattern of aiding debtors in evading income tax.

Ultimately, the High Court ruled in favor of the department, upholding the penalty imposition. The court concluded that there was sufficient evidence to establish the concealment of income, contrary to the contentions raised by the assessee's counsel. The judgment highlighted the importance of concrete evidence in penalty proceedings of a quasi-criminal nature, affirming the department's decision in this case.