Law: Income Tax Act, 1922

Section: 256

Income-tax----Reference---Penalty---Concealment of income---Income returned less than 80 percent. of assessed income---Tribunal finding on the basis of scrutiny of materials available during assessment that assessee had discharged burden of proving that there had been no concealment of income---Cancellation of penalty being justified no question of law arises---[C.I.T. v. Habibullah (M.) (1982) 136 I T R 176 (All.) dissented from]. Penalty proceedings are distinct and different from assessment proceedings. The findings in assessment proceedings are not conclusive but are relevant. The entire material available should be considered afresh by the authorities before imposing the penalty. Even after the addition of the Explanation to section 271(1)(c) of the Indian Income-tax Act, 196.1, conscious concealment is necessary. The Explanation provides only a rule of evidence raising a rebuttable presumption in certain circumstances. Proceeding on the basis that the income returned by the assessee is less than 80 per cent of the total income as assessed, it should be stated that the assessee should initially prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. Unless it is so shown, the assessee shall be deemed to have concealed the particulars of the income or furnished inaccurate particulars of such income. It is only a presumption. The burden is cast on the assessee to prove a negative fact. This can be discharged either by independent evidence led during the penalty proceedings or by a closer scrutiny or appraisal of existing facts and data available. This will take in even the material available at the assessment stage. In assessment proceedings for 1975-76, it was found that the assessee had advanced certain sums as loan to a firm in which he was a partner. The assessee explained that part of it was derived from agricultural income and part of it had been borrowed from certain persons. The Appellate Tribunal sustained the addition of a sum of Rs.85,500 in the quantum appeal. A sum of Rs.45,000 out of the loans said to have been obtained from various persons, was held not satisfactorily proved.…

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