1973 (4) TMI 43 - HC - Income Tax

Court rules penalty not applicable for income concealment in 1947-48 assessment.

Kr. Sripal Singh Versus Commissioner Of Income-Tax, Lucknow

Kr. Sripal Singh Versus Commissioner Of Income-Tax, Lucknow - [1975] 98 ITR 366 Issues:Interpretation of penalty under section 28(1)(c) of the Indian Income-tax Act, 1922 based on concealment of income for the assessment year 1947-48.Analysis:The case involved a reference under section 66(2) of the Indian Income-tax Act, 1922, regarding the applicability of a penalty under section 28(1)(c) of the Act. The dispute arose from the assessment for the year 1947-48 concerning an assessee who was the karta of a Hindu undivided family. The original assessment was made on a total income of Rs. 2,188. Subsequently, it was discovered that the assessee had made a fixed deposit of Rs. 40,000 on January 7, 1947, within the relevant accounting year. This led to the issuance of a notice under section 34. The Income-tax Officer accepted part of the explanation provided by the assessee but rejected the rest, including Rs. 30,000, which was treated as income from an undisclosed source.Upon appeal, the Appellate Assistant Commissioner issued two notices for enhancement, ultimately increasing the assessable income. The Tribunal later deleted the enhancement made by the Appellate Assistant Commissioner but upheld the Income-tax Officer's order. Subsequently, the Income-tax Officer initiated penalty proceedings under section 28(1)(c) of the Act. Despite the assessee providing a written explanation, a penalty of Rs. 6,620 was imposed. The Appellate Assistant Commissioner set aside the penalty, stating that concealment by the assessee was not conclusively established.The Income-tax Officer appealed to the Tribunal, which, based on its findings in a previous appeal, held the assessee guilty of concealment but reduced the penalty to Rs. 2,000. However, the Tribunal's decision heavily relied on the now-overruled case of Lalchand Gopal Das. The High Court noted that the principles in Lalchand Gopal Das were no longer valid law following the Supreme Court's decision in Commissioner of Income-tax v. Anwar Ali. The Supreme Court had clarified that the burden of proving concealment lies with the department, and false explanations alone do not establish concealment. The Tribunal's reliance on the findings from the quantum appeal and the false explanation provided by the assessee was deemed unjustified in light of the Anwar Ali case.Consequently, the High Court answered the referred question in the negative, favoring the assessee and holding that the penalty under section 28(1)(c) was not applicable. The assessee was awarded costs, and the decision of the Tribunal was overturned based on the updated legal position established by the Supreme Court.