1985 (10) TMI 43 - HC - Income Tax

Tribunal's Error in Disregarding Explanation to Section 271(1)(c)

The High Court held that the Tribunal erred in ruling out the consideration of the Explanation to section 271(1)(c) merely because it was not invoked by ... Penalty Issues Involved:1. Applicability of the Explanation to section 271(1)(c) for levying penalty.2. The Tribunal's authority to consider the Explanation to section 271(1)(c) even if not invoked by the Income-tax Officer or Appellate Assistant Commissioner.Summary:Issue 1: Applicability of the Explanation to section 271(1)(c) for levying penaltyThe Tribunal held that since the Income-tax Officer did not invoke the Explanation to section 271(1)(c) for levying the penalty of Rs. 10,000, and the Appellate Assistant Commissioner also did not refer to the Explanation when deleting the penalty, the Revenue could not take support from the Explanation before the Tribunal. The Tribunal emphasized that the penalty under section 271(1)(c) must flow from the satisfaction of the Income-tax Officer, and if the Explanation was not invoked initially, it could not be considered later. The Tribunal concluded that the Revenue did not discharge the onus of proving that the assessee was guilty of concealing income by filing inaccurate particulars.Issue 2: The Tribunal's authority to consider the Explanation to section 271(1)(c) even if not invoked by the Income-tax Officer or Appellate Assistant CommissionerThe High Court disagreed with the Tribunal's view, stating that the Explanation to section 271(1)(c) enacts a rule of evidence and can be invoked by the authority imposing the penalty, even if not initially referred to by the Income-tax Officer or Appellate Assistant Commissioner. The High Court cited precedents, including the Full Bench decision in Vishwakarma Industries v. CIT, which held that the Explanation raises rebuttable presumptions that the assessed income is correct and that the failure to return the correct income was due to fraud or gross or willful neglect. The High Court also referenced judgments from the Gujarat and Orissa High Courts, supporting the view that the Explanation can be considered at any stage of the penalty proceedings.Conclusion:The High Court held that the Tribunal erred in ruling out the consideration of the Explanation to section 271(1)(c) merely because it was not invoked by the Income-tax Officer or Appellate Assistant Commissioner. The Explanation was applicable as the returned income was less than 80% of the assessed income, and the Tribunal should have considered it. Consequently, the question was answered in the negative, in favor of the Revenue and against the assessee, with no order as to costs.