1975 (7) TMI 64 - HC - Income Tax

Penalties upheld for concealment of income in tax returns.

The penalties under section 271(1)(c) of the Income-tax Act for the assessment years 1963-64, 1964-65, and 1965-66 were upheld by the Tribunal. The ... Burden Of Proof, Revised Returns Issues Involved:1. Justification of penalties under section 271(1)(c) of the Income-tax Act for the assessment years 1963-64, 1964-65, and 1965-66.2. Calculation of penalty based on the difference between the tax on the incomes shown in the first return and the tax on the incomes assessed.Detailed Analysis:Issue 1: Justification of Penalties under Section 271(1)(c)The Tribunal referred two questions of law concerning penalties under section 271(1)(c) of the Income-tax Act for the assessment years 1963-64, 1964-65, and 1965-66. The assessee filed original returns showing significantly lower incomes and later revised these returns to show much higher incomes. The Income-tax Officer and the Inspecting Assistant Commissioner concluded that the assessee had concealed income and had not been able to discharge the onus of proving that the differences in income were not due to fraud or gross or willful neglect. The penalties levied were Rs. 90,000, Rs. 80,000, and Rs. 20,000 for the respective years.The Tribunal upheld the penalties, noting that the original returns were incorrect and the assessee could not explain the basis for the original returns. The Tribunal emphasized that filing a revised return does not absolve the assessee from the default committed in the original return. The concealment was deemed to have taken place in the original returns, and the penalties were justified.The Tribunal's findings were supported by the Supreme Court's observations in Commissioner of Income-tax v. Khoday Eswarsa and Sons and K. C. Trunk and Bucket Factory v. Commissioner of Income-tax, which stated that penalty proceedings are penal in nature and the department must establish that the assessee consciously concealed income or furnished inaccurate particulars.The Tribunal concluded that the staggering differences between the original and revised returns indicated deliberate concealment of income. The Explanation to section 271(1)(c) was applicable as the total income returned was less than 80% of the assessed income, indicating gross or willful neglect.Issue 2: Calculation of PenaltyThe second question addressed the method of calculating the penalty. The Tribunal held that the penalty should be based on the difference between the tax on the incomes shown in the original returns and the tax on the incomes assessed. This method aligns with clause (iii) of sub-section (1) of section 271, which stipulates that the penalty should be a sum not less than, but not exceeding twice, the amount of the income in respect of which particulars have been concealed or inaccurate particulars furnished.The Tribunal justified this approach by noting that the concealment occurred in the original returns, and thus the penalty should be calculated based on the tax that would have been avoided if the original returns had been accepted.ConclusionBoth questions of law were answered in the affirmative and against the assessee. The penalties under section 271(1)(c) were justified for the assessment years 1963-64, 1964-65, and 1965-66, and the calculation of the penalty based on the difference between the tax on the incomes shown in the first returns and the tax on the incomes assessed was upheld.