1973 (8) TMI 32 - HC - Income Tax

Levy of penalty under section 28(1)(c) of the Indian Income-tax Act, 1922 - explanation regarding cash credits in the accounts was rejected and the amounts were assessed as assessee s income - Whether, on the facts and circumstances of the case, the Appellate Tribunal was correct in holding that the provisions of section 28(1)(c) of the Indian Income-tax Act, 1922, applied to the applicant - Our answer to the question referred is in the negative, that is, in favour of the assessee and against the revenue

Summary

Issues Involved:
1. Applicability of Section 28(1)(c) of the Indian Income-tax Act, 1922.
2. Burden of proof in penalty proceedings.
3. Evaluation of evidence and findings from assessment proceedings in penalty cases.

Issue-wise Detailed Analysis:

1. Applicability of Section 28(1)(c) of the Indian Income-tax Act, 1922:
The primary issue was whether the provisions of Section 28(1)(c) of the Indian Income-tax Act, 1922, applied to the assessee. The Income-tax Officer imposed a penalty of Rs. 10,000, which was later reduced to Rs. 5,500 by the Tribunal. The Tribunal upheld the penalty based on findings from the assessment proceedings, which included unexplained credits in a suspense account. The Tribunal concluded that the assessee had concealed particulars of income or deliberately furnished inaccurate particulars, thereby justifying the penalty under Section 28(1)(c).

2. Burden of Proof in Penalty Proceedings:
The judgment emphasized that penalty proceedings under Section 28(1)(c) are penal in nature. The burden of proof lies with the department to establish that the assessee is liable for the penalty. The Supreme Court in Anwar Ali's case laid down that the department must prove that the assessee has concealed income or deliberately furnished inaccurate particulars. The falsity of the assessee's explanation alone does not suffice; there must be cogent material or evidence indicating that the disputed amount is taxable income.

3. Evaluation of Evidence and Findings from Assessment Proceedings in Penalty Cases:
The judgment highlighted that findings from assessment proceedings are not conclusive in penalty proceedings but can be considered as good evidence. The Tribunal's reliance solely on the assessment findings without independent evaluation was deemed improper. The Supreme Court in Khoday Eswarsa and Sons' case reiterated that penalty cannot be levied solely based on assessment findings; there must be additional evidence of conscious concealment or deliberate furnishing of inaccurate particulars.

The Tribunal in this case failed to provide independent discussion or additional evidence beyond the assessment findings. The judgment pointed out that the Tribunal's conclusion was based on the assessee's failure to prove that the amounts were borrowings, which is insufficient for sustaining a penalty. The department needed to establish that the amounts were indeed taxable income, which they failed to do.

Conclusion:
The court concluded that there was no material evidence to support the Tribunal's finding that the assessee had concealed income or deliberately furnished inaccurate particulars. The judgment referenced the principles laid down in Anwar Ali's and Khoday Eswarsa and Sons' cases, emphasizing the need for cogent evidence in penalty proceedings. Consequently, the court answered the question in the negative, in favor of the assessee and against the revenue, and directed the department to pay the costs of the reference.