1975 (12) TMI 84 - AT - Income Tax

Summary

Issues:
1. Penalty under s. 271(1)(c) for concealing income for the Accounting period relevant to the Asst. yr. 1967-68.
2. Justification of penalty based on reconstructed balance sheet due to damaged account books.
3. Application of Explanation to s. 271(1)(c) for penalty imposition.
4. Burden of proof on Revenue to establish additions to capital account as Revenue receipts.
5. Assessment of presence or absence of fraud or wilful or gross neglect in penalty proceedings.

Analysis:

1. The appeal pertains to the imposition of a penalty under s. 271(1)(c) against the assessee for concealing income for the relevant accounting period. The IAC levied a penalty of Rs. 23,000 based on the unexplained accretion to the capital account of the assessee amounting to Rs. 19,000, which was added to the total income during re-assessment proceedings.

2. The assessee's account books were damaged, leading to the reconstruction of the balance sheet for the year under consideration based on opening balances from the subsequent year. The IAC initiated penalty proceedings, contending that the inaccuracy in the accounts indicated a conscious concealment of income. However, the assessee argued that the discrepancies arose due to the ITO's error in the original assessment and the damage to the account books.

3. The Explanation to s. 271(1)(c) was invoked by the IAC, stating that the income returned was less than 80% of the assessed income, shifting the burden to the assessee to prove the absence of fraud or wilful neglect. The IAC held that the Explanation applied as the assessee failed to establish the absence of fraud or wilful negligence, justifying the penalty imposition.

4. The Tribunal referenced the Supreme Court's decision in CIT vs. Anwar Ali, emphasizing that the burden lies on the Revenue to prove that the additions to the capital account represent Revenue receipts. In this case, there was no evidence to support the Revenue's claim, and the inaccuracies in the accounts due to damaged books did not conclusively establish conscious concealment of income.

5. Ultimately, the Tribunal concluded that the circumstances did not warrant the imposition of a penalty under s. 271(1)(c) as there was no evidence of fraud or wilful neglect. The inaccuracies in the accounts resulting from the damaged books did not indicate deliberate concealment of income. Therefore, the appeal by the assessee was allowed, and any penalty paid was to be refunded.