Law: Income Tax Act, 1922

Section: 28

Indian Income Tax Act, 1922(XI of 1922)-Section 28-Penalty- Undisclosed income-Cost of assessees house included by Income Tax Officer in his total income, rejecting his evidence that he had taken loans- Penalty for undisclosed income levied on that material alone- No positive evidence concealment adduced by Department- Whether penalty valid in law-Held no:- The explanation of the assessee that he had borrowed the cost of the construction of a house from three persons was not accepted by the Income fax Officer and he added the cost of the house to the income of the assessee in the assessment for the assessment year 1955-56. The Income fax officers order was confirmed on appeals by the Appellate Assistant Commissioner and the Appellate Tribunal. The Income Tax Officer levied penalty on the assessee for concealment of income. This order was confirmed by tile Appellate Assistant Commissioner relying on the findings of the Tribunal in the assessment proceedings. On further appeal, the penalty was set aside by the Tribunal. On a reference: Held, that whatever evidence had been produced and considered by either side was at the assessment stage before the Income Tax Officer and thereafter no evidence had been produced on either side. The Tribunal had found as a fact that the department had not found any materials to hold that the amount represented the assessee income and this finding of fact had not been challenged in any of the questions on behalf of the revenue. For this reason alone, the order of the Tribunal had to be confirmed. Penalty proceedings being penal in character, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. Apart from the falsity of the explanation given by the assessee, the department must have before it, before levying penalty, cogent material or evidence from which it could be inferred that the assessee had consciously concealed the particulars of his income or had deliberately furnished particulars in respect of the same and that the disputed amount is a revenue receipt. Therefore, the Tribunal was correct in holding that the department had not discharged the onus that rested on it and…

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