1981 (1) TMI 119 - AT - Income Tax

Appeal granted, penalty canceled under section 271(1)(c). Lack of examination cited.

KN. KAPOOR. Versus INCOME TAX OFFICER.

The Tribunal allowed the appeal, canceling the penalty imposed under section 271(1)(c). The decision emphasized the lack of proper examination of the ... - Issues:Imposition of penalty under section 271(1)(c) for alleged concealment of income based on excess sales over stocks, reliance on letters from a third party to explain additional stocks, applicability of Explanation to section 271(1)(c), burden of proof on the Department to establish concealment, examination of third party by the assessing officer, rejection of assessee's explanation without proper examination, comparison of decisions from various High Courts and the Supreme Court.Analysis:The appeal before the Appellate Tribunal was against the imposition of a penalty of Rs. 14,500 under section 271(1)(c) by the AAC. The case involved discrepancies in sales and stocks, with the ITO adding the unexplained sales amount to the assessee's income. The assessee claimed the excess stock was due to borrowing from a third party, supported by letters from the party. The ITO, however, rejected the explanation, deeming it vague and unsupported by accounts. The AAC upheld the penalty, considering the untrustworthiness of the third party's statement and lack of entries in their books.The Tribunal noted that the Explanation to section 271(1)(c) was not applicable in this case. The burden was on the Department to prove concealment positively. Despite the additions made during assessment, the rejection of the assessee's explanation based on third-party letters required proper examination of the third party by the assessing officer. Since the third party was not examined, the rejection of the explanation did not provide positive evidence of concealment. The Tribunal concluded that the penalty was imposed solely due to the unsatisfactory nature of the explanation, not its falsehood, making it an unfit case for penalty under section 271(1)(c).The Tribunal considered case laws cited by both parties, emphasizing the need for the Department to establish concealment conclusively. The Tribunal ultimately allowed the appeal, canceling the penalty imposed under section 271(1)(c).In summary, the Tribunal's decision focused on the lack of proper examination of the third party supporting the assessee's explanation, leading to the cancellation of the penalty due to insufficient evidence of concealment. The case underscored the importance of thorough investigation and conclusive proof in matters of alleged income concealment.