1985 (5) TMI 6 - HC - Income Tax

High Court: Burden of proof on assessee for penalty under Income-tax Act; Tribunal erred, onus not on Revenue.

The High Court clarified that the burden of proving concealment of income for penalty imposition lies with the assessee, not the Revenue, post-amendment ... Burden Of Proof, Explanation To S. 271(1)(c), Penalty Issues:1. Whether the onus was on the department to prove concealment of income by the assessee for penalty imposition.2. Application of Explanation to section 271(1)(c) of the Income-tax Act, 1961.3. Reassessment of facts by the Tribunal in accordance with the correct legal perspective.Analysis:1. The judgment concerns a reference under section 256(2) of the Income-tax Act, 1961, regarding the onus of proving concealment of income by the assessee. The Tribunal had set aside a penalty imposed by the Inspecting Assistant Commissioner, citing lack of mens rea in concealment and insufficient evidence of unaccounted profits. However, the High Court clarified that after the amendment of section 271(1)(c) and the Explanation, the onus is on the assessee to prove no failure in returning correct income. The Full Bench emphasized that the burden of establishing concealment in penalty proceedings lies with the assessee, not the Revenue. The Tribunal erred in placing the onus on the Department to prove unaccounted profits, contrary to the legal position post-amendment.2. The judgment extensively discussed the application of the Explanation to section 271(1)(c) of the Act. The Full Bench highlighted that the Explanation raises legal presumptions against the assessee, including the correctness of the assessed income, concealment of particulars, and furnishing inaccurate particulars of income. It was clarified that the assessee must demonstrate circumstances indicating no failure in returning correct income. The Tribunal's reliance on mens rea for penalty imposition was deemed incorrect, as the tax field does not require proof of mens rea beyond reasonable doubt. The Tribunal's failure to consider the legal obligations imposed by the Explanation led to an erroneous decision in setting aside the penalty.3. The High Court noted that the Tribunal had incorrectly appreciated the facts based on an erroneous legal perspective. Consequently, the matter was remanded to the Tribunal for reassessment of facts in line with the correct legal principles outlined in the judgment. The Tribunal was instructed to reconsider the facts, reach conclusions after hearing both parties, and make a decision in accordance with the law as elucidated by the High Court. The relevance of the Explanation to section 271(1)(c) was emphasized, indicating its crucial role in determining penalty imposition based on concealment of income.