1989 (3) TMI 84 - HC - Income Tax

Tribunal upholds penalty but deems it unjustified due to lack of evidence on concealment or mens rea.

The Tribunal upheld the penalty imposed by the Inspecting Assistant Commissioner, stating the assessee was given a proper opportunity of being heard. ... Burden Of Proof, Penalty Issues Involved: The judgment involves two questions of law referred under section 256(2) of the Income-tax Act, 1961. 1. First Issue - Proper Opportunity of Being Heard: The Tribunal was questioned on whether it was justified in disposing of the appeal without considering the contention that no proper opportunity of being heard was allowed by the Inspecting Assistant Commissioner in the penalty proceedings. - The Inspecting Assistant Commissioner initiated penalty proceedings under section 271(1)(c) as the minimum penalty exceeded Rs. 1,000, and imposed a penalty of Rs. 32,500 due to alleged concealment of income by the assessee. - The Tribunal upheld the penalty imposed by the Inspecting Assistant Commissioner after considering the submissions of both parties. - The judgment states that the assessee was given a proper opportunity of being heard by the Inspecting Assistant Commissioner, as evidenced by a notice of hearing and a letter filed by the assessee's representative. - It was noted that the assessee did not appear in person but sent a letter, and there was no dispute raised about this before the Tribunal. - The first question was declined to be answered as framed, but it was clarified that the assessee was given a proper opportunity of being heard in the penalty proceedings. 2. Second Issue - Levy of Penalty: The second question raised whether the order of the Tribunal confirming the levy of penalty was vitiated or liable to be set aside. - The judgment highlighted that apart from the assessee's disclosure of adding a sum of Rs. 25,000, there was no further evidence presented by the Department to prove concealment of income or mens rea on the part of the assessee. - Referring to a Supreme Court case, it was emphasized that penalty cannot be imposed solely based on the assessment of undisclosed income without proving mens rea in a quasi-criminal offense. - It was concluded that there was no concrete evidence to show that the amount added as income was actually concealed income, and penalty cannot be imposed merely on suspicion. - The second question was answered in the affirmative and in favor of the assessee. The judgment was delivered by SUHAS CHANDRA SEN J., with agreement from BHAGABATI PRASAD BANERJEE J., stating that the Tribunal did not ignore the contention of the applicant and that proper opportunity of being heard was provided by the Inspecting Assistant Commissioner. However, the levy of penalty was deemed unjustified due to lack of evidence proving concealment of income or mens rea on the part of the assessee.