1973 (10) TMI 3 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that no penalty was leviable in this case under section 271 (1)(c) read with the Explanation thereto and in deleting the penalty of Rs. 50,000 levied by the Inspecting Assistant Commissioner - Whether the cash found in the possession of the assessee can be treated as belonging to him rejecting his explanation that it did not belong to him

Issues Involved:
1. Whether the Tribunal was right in law in holding that no penalty was leviable under section 271(1)(c) read with the Explanation thereto.
2. The applicability of the Supreme Court decision in Commissioner of Income-tax v. Anwar Ali to the present case.
3. The interpretation and impact of the Explanation to section 271(1) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Whether the Tribunal was right in law in holding that no penalty was leviable under section 271(1)(c) read with the Explanation thereto:

The Tribunal deleted the penalty of Rs. 50,000 levied by the Inspecting Assistant Commissioner under section 271(1)(c) of the Income-tax Act, 1961. The Tribunal observed that the assessee consistently claimed that the money found in his possession did not belong to him. The Tribunal noted that while the revenue assessed the amount under section 69A due to the assessee's inability to prove ownership, this alone did not justify the imposition of a penalty. The Tribunal emphasized that the revenue must prove that the material sufficient for assessment is also sufficient for penalty, which was not established in this case. The Tribunal concluded that "the mere assessment of the amount does not automatically lead to the imposition of penalty."

2. The applicability of the Supreme Court decision in Commissioner of Income-tax v. Anwar Ali to the present case:

The Tribunal relied on the Supreme Court's decision in Anwar Ali's case, which held that penalty proceedings are penal in nature and require the department to establish that the assessee's receipt of the amount constituted income. The Tribunal noted that the revenue failed to prove that the money found with the assessee was his concealed income. The Tribunal asserted that the revenue's inability to disprove the assessee's explanation meant that the principle laid down in Anwar Ali's case applied, thereby justifying the deletion of the penalty.

3. The interpretation and impact of the Explanation to section 271(1) of the Income-tax Act, 1961:

The Explanation to section 271(1) shifts the burden of proof to the assessee if the returned income is less than 80% of the assessed income. The department argued that this Explanation made the Anwar Ali decision inapplicable. However, the Tribunal and the High Court found that the Explanation only affects the onus of proof and does not alter the fundamental requirement that the revenue must establish the concealment of income. The High Court noted that the Explanation creates a presumption of concealment but does not conclusively establish it. The Court emphasized that the revenue must still prove that the amount assessed as income was indeed the assessee's income and that there was conscious concealment or inaccurate furnishing of particulars.

The High Court concluded that the Tribunal correctly applied the principles from Anwar Ali's case and the Explanation to section 271(1). The Court observed that the revenue's mere rejection of the assessee's explanation without further evidence did not meet the requirements for imposing a penalty under section 271(1)(c). The Court upheld the Tribunal's decision to delete the penalty, affirming that the revenue failed to prove the necessary elements for penalty imposition.

Conclusion:

The High Court answered the referred question in the affirmative, favoring the assessee and against the department. The Court held that the Tribunal was right in law in holding that no penalty was leviable under section 271(1)(c) read with the Explanation thereto. The Court emphasized the need for the revenue to establish both the ownership of the money and the conscious concealment of income to justify a penalty under section 271(1)(c).

← Previous Next →