Penalty under s.271(1)(c) cancelled where revenue failed to prove concealment and assessee filed bona fide revised returns

HC held the penalty under s.271(1)(c) was rightly cancelled. Revenue bears initial burden to prove concealment; the burden shifts to the assessee only if no explanation or a false one is shown. Where the assessee filed revised returns and the assessing authority regularized them without objection, the assessee's explanation-given to end litigation-was treated as bona fide. Tribunal's cancellation of the penalty, affirmed by CIT(A), was upheld by the HC.

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Issues involved: Question of law regarding cancellation of penalty u/s 271(1)(c) of the Income-tax Act, 1961.

Summary:

The High Court of Madhya Pradesh considered a reference made by the Income-tax Appellate Tribunal regarding the cancellation of penalty u/s 271(1)(c) of the Income-tax Act, 1961. The case involved the assessee initially filing returns for assessment years 1983-84 to 1986-87 showing low income, which led to action u/s 132 and reopening of assessment. The assessee later filed revised returns showing higher income after a notice u/s 148. The Assessing Officer imposed penalties under section 271, which the assessee contested, stating the revised returns were voluntary to avoid litigation.

The Commissioner of Income-tax (Appeals) upheld the penalty, but the Tribunal ruled in favor of the assessee. The Tribunal noted that the Revenue failed to prove concealment of income, relying on the Supreme Court judgment in Sir Shadilal Sugar and General Mills Ltd. vs Commissioner of Income-tax. It emphasized that the burden lies on the Revenue to establish concealment, shifting to the assessee only if no explanation is offered or if the explanation is false.

In this case, the Tribunal found the assessee's explanation for revised returns as bona fide, considering the circumstances. The High Court agreed with the Tribunal, stating that once the revised assessment was regularized and no objections were raised by the assessing authority, the declaration of income by the assessee could be seen as genuine. Therefore, the Tribunal was justified in canceling the penalty imposed by the Assessing Officer. The reference was answered affirmatively in favor of the Tribunal's decision.

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