1974 (5) TMI 26 - HC - Income Tax

Appellate Tribunal Cancels Penalty Order for Income Tax Assessee (1)(c)

The Appellate Tribunal was justified in canceling the penalty order imposed by the Inspecting Assistant Commissioner of Income-tax as the assessee ... Cash Credits, Penalty Proceedings Issues Involved:1. Justification of the Appellate Tribunal in canceling the penalty order under section 271(1)(c) read with section 274 of the Income-tax Act, 1961.2. Burden of proof regarding concealment of income or furnishing inaccurate particulars.3. Applicability and interpretation of the Explanation to section 271(1)(c) of the Income-tax Act, 1961.4. Distinction between assessment proceedings and penalty proceedings.Issue-wise Detailed Analysis:1. Justification of the Appellate Tribunal in Canceling the Penalty Order:The primary question referred to the court was whether the Appellate Tribunal was justified in canceling the penalty order imposed by the Inspecting Assistant Commissioner of Income-tax. The Tribunal had accepted the assessee's contention that it had not concealed any income nor furnished inaccurate particulars. The Tribunal found the assessee's explanation satisfactory and thus canceled the penalty.2. Burden of Proof Regarding Concealment of Income or Furnishing Inaccurate Particulars:The revenue argued that the onus lay on the assessee to prove that there was no fraud or wilful neglect on their part. The Tribunal was under the impression that the burden of proving the essential ingredients for imposing penalty was on the revenue. However, it was noted that sub-section (1) of section 271 places the burden on the assessee to prove the absence of fraud or gross or wilful neglect. The assessee must be given an opportunity to rebut the presumption of concealment of income.3. Applicability and Interpretation of the Explanation to Section 271(1)(c):The Explanation to section 271(1)(c) creates a presumption that if the returned income is less than eighty percent of the assessed income, the assessee is deemed to have concealed income or furnished inaccurate particulars. This presumption is rebuttable, and the assessee can show that the failure to return the correct income did not arise from fraud or gross or wilful neglect. The court noted that the Explanation was not invoked by the Inspecting Assistant Commissioner, and the revenue did not seek to justify the penalty based on the Explanation before the Tribunal.4. Distinction Between Assessment Proceedings and Penalty Proceedings:The court emphasized that penalty proceedings are distinct from assessment proceedings. Even if the assessee failed to give a satisfactory explanation during the assessment proceedings, they could offer a fresh explanation during the penalty proceedings. The Tribunal found that the assessee had provided evidence to prove that no penalty was warranted, including explanations for the cash credits and the foreign sales account.Conclusion:The court concluded that the Tribunal was justified in canceling the penalty order. The assessee had provided satisfactory explanations, and the Tribunal's findings were based on evidence. The court answered the referred question in the affirmative, in favor of the assessee and against the revenue. There was no order as to costs.