1962 (1) TMI 85 - HC - Income Tax

Court upholds income tax assessment, rules penalty invalid under section 28(1)(c). Assessee prevails.

The High Court upheld the validity of the assessment of the deposited amount to Income Tax, ruling in favor of the Income Tax department. However, the ... - Issues:1. Valid assessment of a deposited amount to Income Tax.2. Legality of the penalty imposed under section 28(1)(c) of the Income Tax Act.Analysis:Issue 1: Valid assessment of a deposited amount to Income TaxThe case involved an assessment year where the Income Tax Officer added a sum of Rs. 63,000 to the net profits shown by the assessee, based on an overdraft obtained from a bank. The Income Tax Officer concluded that the amount in fixed deposits of three individuals actually belonged to the assessee and represented undisclosed income. The Appellate Assistant Commissioner and the Income Tax Appellate Tribunal upheld the assessment. The High Court reviewed the case and found sufficient material to support the conclusion that the deposited amount was indeed the secret income of the assessee. The Tribunal considered various factors such as the improbability of the alleged depositors engaging in such transactions, the lack of negotiation for the purchase of a colliery, and discrepancies in the depositors' story. The High Court held that the amount was validly assessed to Income Tax, ruling in favor of the Income Tax department.Issue 2: Legality of the penalty imposed under section 28(1)(c) of the Income Tax ActRegarding the penalty imposed under section 28(1)(c) of the Income Tax Act, the High Court emphasized that in penal proceedings, the onus lies on the Income Tax department to prove the assessee's guilt of concealing income particulars. Citing legal precedents, the court highlighted that the burden of proof is on the department to establish the offense. The court found that the department failed to discharge this burden in the present case. The Income Tax Appellate Tribunal's misdirection in considering the onus on the assessee was noted, and the court reiterated the established principle that the burden rests on the Crown to justify the penalty. The court differentiated this case from another judgment where willful suppression of income was proven. Ultimately, the High Court held that the penalty imposed on the assessee was not legally valid, ruling in favor of the assessee against the Income Tax department.In conclusion, the High Court upheld the validity of the assessment of the deposited amount to Income Tax but deemed the penalty imposed under section 28(1)(c) of the Income Tax Act as not legally valid. No costs were awarded in this reference.