1977 (1) TMI 15 - HC - Income Tax

High Court Rulings on Tax Penalties: Assessments 1959-1966

The High Court upheld the cancellation of penalties for the assessment years 1959-60 to 1961-62, finding that the Income-tax Officer's estimates lacked ... Assessment Of Income, Higher Rate, Levy Of Penalty Issues Involved:1. Whether the Tribunal was right in law in cancelling the penalty levied u/s 271(1)(c) of the Income-tax Act, 1961, for the assessment years 1959-60, 1960-61, 1961-62, 1964-65, and 1965-66.2. Whether the conclusion of the Tribunal that there was no concealment of income by the assessee within the purview of section 271(1)(c) is a reasonable view on the facts and circumstances of the case.Summary:Issue 1: Penalty for Assessment Years 1959-60 to 1961-62The assessee, a contractor, did not maintain books of account and filed returns based on estimates. The Income-tax Officer (ITO) initiated reassessment proceedings u/s 147 for these years, finding an unexplained increase in wealth of Rs. 56,000, which was spread over the three years. The ITO levied penalties u/s 271(1)(c), which were later reduced by the Appellate Assistant Commissioner. The Tribunal found that the ITO's computation involved guesswork, particularly in estimating household and marriage expenses, and lacked material evidence to support the penalties. The Tribunal concluded that the penalties were not justified, and this view was upheld by the High Court, which found no material evidence of concealed income for these years.Issue 2: Penalty for Assessment Years 1963-64 to 1965-66For these years, the ITO estimated the business income at 20% of the estimated turnover due to the absence of books of account and discrepancies in the bills. The ITO found an unexplained increase in wealth of Rs. 55,000 over five years but did not apportion this amount to specific years. The Tribunal cancelled the penalties, but the High Court found that the ITO's estimates were based on relevant figures for these years. The High Court held that the assessee's lower estimates indicated deliberate underestimation, justifying an inference of concealment. The penalties for these years were thus upheld by the High Court.Conclusion:For the assessment years 1959-60, 1960-61, and 1961-62, the Tribunal's cancellation of penalties was affirmed, and the questions were answered in the affirmative and against the revenue. For the assessment years 1963-64, 1964-65, and 1965-66, the Tribunal's cancellation of penalties was overturned, and the questions were answered in the negative and in favor of the revenue. There was no order as to costs.