1983 (3) TMI 26 - HC - Income Tax

High Court rules on penalty for income concealment, applies pre-1968 law

The High Court held that the penalty under section 271(1)(c) of the Income-tax Act could be imposed for concealment of income, contrary to the Tribunal's ... Burden Of Proof, Penalty Issues:1. Whether penalty under section 271(1)(c) of the Income-tax Act can be imposed for concealment of income.2. Whether the quantum of penalty should be governed by the provisions of the law in force before April 1, 1968.Detailed Analysis:Issue 1:The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the assessment year 1965-66. The Income-tax Appellate Tribunal referred two questions of law to the High Court. The primary issue was whether the Tribunal was correct in holding that no penalty could be imposed under section 271(1)(c) of the Income-tax Act for the alleged concealment of income. The assessee, a cooperative society, was found to have a significant difference in the balance between its books and the bank account. The Income Tax Officer treated this difference as undisclosed income and initiated penalty proceedings under section 271(1)(c). The Appellate Assistant Commissioner confirmed the addition made by the Officer, leading to the imposition of a penalty by the Income-tax Appellate Tribunal. However, the Tribunal ultimately held that the penalty could not be imposed as the explanation provided by the assessee regarding the discrepancy in the bank account was not conclusively disproved by the Department. The Tribunal found no evidence of fraud or gross negligence on the part of the assessee, concluding that the penalty was unwarranted.Issue 2:The second question referred to the High Court was whether the quantum of penalty should be determined based on the law in force before April 1, 1968. The Income-tax Appellate Tribunal had imposed a penalty considering a revised return filed by the assessee after that date. However, the Tribunal held that the amended provisions effective from April 1, 1968, could not be applied retroactively to an earlier assessment year. The Tribunal emphasized that the relevant law for determining the quantum of penalty should be the one in force at the time of the delinquency, which, in this case, was when the revised return was filed in 1969. Therefore, the Tribunal concluded that the penalty should be calculated based on the law applicable before April 1, 1968, and not the amended provisions.In summary, the High Court held that the penalty under section 271(1)(c) could be imposed for concealment of income, disagreeing with the Tribunal's decision. Additionally, the Court ruled that the quantum of penalty should be governed by the law in force at the time of the delinquency, leading to a decision against the assessee on both issues.