2000 (12) TMI 79 - HC - Income Tax

Tax return disclosure of income addition and alleged concealment u/s271(1)(c); penalty cancellation upheld, no fraud presumed.

In considering penalty under s. 271(1)(c) for alleged concealment, the HC held that the Explanation does not create any automatic presumption of fraud or ... Levy of penalty u/s 271(1)(c) - Concealment Of Income - fraud and wilful neglect - HELD THAT:- Explanation to section 271(1)(c) of the Act required the assessee to show that there was no fraud or wilful neglect does not any way enable the Revenue to contend that there is a presumption of fraud or neglect without adducing any evidence, whatever to substantiate such assertion. In this case, evidently there is no evidence at all on the basis of which the Revenue can contend that the assessee had fraudulently or wilfully or negligently concealed the income. His agreement to the addition of the amount, by itself does not establish fraud or wilful neglect without something more. The Tribunal has found that the Appellate Assistant Commissioner was right in holding that the amount, addition of which was agreed to by the assessee, was an amount which had been set out in an enclosure filed along with the assessee's return of income. There was, therefore, no question regarding that amount which has been fraudulently concealed. Having regard to the finding recorded by the Tribunal on the facts the conclusion reached by the Tribunal cannot be said to be erroneous. The question referred to us regarding the correctness of the Tribunal's order is, therefore, answered in favour of the assessee and against the Revenue. The respondent shall be entitled to costs on the sum Issues involved: Levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961 based on alleged fraud and wilful neglect in agreeing to addition of income.Summary:The High Court of Madras, in the case, addressed the issue of penalty imposition u/s 271(1)(c) of the Income-tax Act, 1961. The Tribunal found the penalty unwarranted as there was no evidence of fraud or wilful neglect by the assessee, who had agreed to add a specific sum to his income for cooperation with the Department. The assessing authorities lacked material to prove wilful neglect on the part of the assessee.The judgment referred to the Supreme Court case of Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705, emphasizing that every addition to income does not automatically imply concealment. It highlighted the importance of proving mens rea for a quasi-criminal offense. Additionally, the court cited the case of CIT v. Inden Bislers [1999] 240 ITR 943, cautioning against finding fraud without proper evidence.The High Court concluded that in this case, there was no evidence to support the Revenue's claim of fraudulent or wilful concealment of income by the assessee. Merely agreeing to add an amount to income did not establish fraud or wilful neglect without further evidence. The Tribunal upheld that the agreed-upon amount was disclosed in the assessee's return of income, indicating no fraudulent concealment.Based on the Tribunal's findings, the High Court ruled in favor of the assessee and against the Revenue regarding the correctness of the Tribunal's order. The assessee was awarded costs amounting to Rs. 1,500.