1982 (6) TMI 92 - AT - Income Tax

Tribunal dismisses revenue's appeal, ruling penalty cancellation under Section 271(1)(c) for lack of proof.

The Tribunal upheld the Appellate Assistant Commissioner's decision to cancel the penalty imposed under Section 271(1)(c). It found that the Income Tax ... - Issues Involved:1. Legitimacy of cash credits.2. Imposition of penalty under Section 271(1)(c).3. Burden of proof for concealment of income.4. Applicability of legal precedents and judicial interpretations.Detailed Analysis:1. Legitimacy of Cash Credits:The Income Tax Officer (ITO) did not believe the cash credits appearing in the books of the assessee, specifically amounts credited to Mathra Dass (Rs. 10,000), Panna Lal Shiv Shankar (Rs. 2,000), and Sukhminder Singh (Rs. 12,000). The Appellate Assistant Commissioner (AAC) confirmed the total addition of Rs. 24,000. However, the Tribunal deleted the addition of Rs. 2,000 pertaining to Panna Lal Shiv Shankar. The ITO had brought evidence to prove the falsity of these credits, particularly highlighting that Mathra Dass was not a man of means and his explanation was concocted.2. Imposition of Penalty under Section 271(1)(c):The ITO initiated proceedings under Section 271(1)(c) and levied a penalty of Rs. 24,000. The AAC later cancelled this penalty. The revenue disputed this cancellation, arguing that the ITO had provided sufficient evidence to prove the falsity of the credits, and thus, the penalty should be sustained. The Department's representative argued that no additional material is necessary for sustaining the penalty beyond what was considered for the addition under Section 68.3. Burden of Proof for Concealment of Income:The assessee's counsel argued that it was the first year of the assessee's business, and the capital introduced was only Rs. 10,000. The counsel emphasized that the penalty could not be levied as the assessment had not been finalized when the penalty was imposed. The Tribunal noted that the mere rejection of the assessee's explanation could warrant an addition in the case of cash credits but was insufficient to warrant a penalty for concealment under Section 271(1)(c). The Tribunal highlighted that the entirety of circumstances must be considered, and it must be conclusively proven that the assessee consciously concealed income or furnished inaccurate particulars.4. Applicability of Legal Precedents and Judicial Interpretations:The Tribunal referred to various precedents, including the case of Vishwakarma Industries vs. CIT, where the Punjab and Haryana High Court observed that the assessment proceedings and penalty proceedings are distinct and independent. The Tribunal also considered the case of Lab Chand Deokaran vs. ITO, which emphasized that discrepancies in statements are insufficient to prove concealment without cross-examination and additional evidence. The Tribunal concluded that the reliance on the Orissa High Court judgment in the case of Hanumandass Maheswari by the Department was misplaced as it dealt with the burden of proof for cash credits and not penalty.Conclusion:After considering the submissions and facts, the Tribunal upheld the AAC's decision to cancel the penalty. The Tribunal found that the ITO failed to conclusively prove that the assessee had concealed income. The Tribunal reiterated that the rejection of the assessee's explanation might justify an addition but does not automatically justify a penalty for concealment under Section 271(1)(c). The revenue's appeal was dismissed.Result:The revenue's appeal is dismissed.