1976 (1) TMI 36 - AT - Income Tax

Tribunal cancels penalty under IT Act citing lack of proof. Revenue burdened to establish income nature.

The Appellate Tribunal canceled the penalty imposed under section 271(1)(c) of the IT Act, 1961, amounting to Rs. 20,000. The tribunal held that the ... - Issues:1. Imposition of penalty under section 271(1)(c) of the IT Act, 1961.2. Burden of proof on revenue to establish the nature of income.3. Application of Explanation to section 271(1)(c) and the opportunity to explain.Detailed Analysis:1. The judgment concerns the challenge to the imposition of a penalty amounting to Rs. 20,000 under section 271(1)(c) of the IT Act, 1961. The assessee had invested Rs. 20,000 in purchasing an adjacent shop in the name of his grandson, which was not disclosed in the books. The Income Tax Officer (ITO) imposed the penalty as the source of investment was not proven, and the assessee admitted the offense. The Appellate Assistant Commissioner (AAC) upheld the penalty, leading to the appeal before the Appellate Tribunal.2. The primary issue revolved around the burden of proof on the revenue to establish that the undisclosed amount was indeed the revenue income of the assessee. The assessee claimed the investment came from past savings and hand-loans but could not substantiate it. The tribunal emphasized that merely offering the amount for assessment does not automatically make it the revenue income of the year. Citing precedents, including the Supreme Court ruling in Anwar Ali's case and the Punjab & Haryana High Court ruling in Gumani Ram Siri Ram, it was highlighted that the revenue must prove the nature of the income.3. The judgment also delved into the application of the Explanation to section 271(1)(c) regarding the presumption of concealment of income if the total income returned is less than 80% of the total income assessed. The tribunal noted that the ITO did not invoke this Explanation, depriving the assessee of the opportunity to rebut the presumption. It was emphasized that the department could not rely on the Explanation at a later stage to sustain the penalty, as the assessee should have been given a chance to explain and disprove any alleged concealment.4. Ultimately, the tribunal allowed the appeal and canceled the penalty, highlighting that the revenue failed to establish that the undisclosed amount was indeed the revenue income of the assessee. The failure to invoke the Explanation and provide the assessee with an opportunity to rebut the presumption further weakened the case for penalty imposition.