1973 (7) TMI 2 - HC - Income Tax

(i) Whether assessee had deliberately furnished inaccurate particulars of his income when he did not show the share income from M/s. Fairdeal Motors Indore in the return so as to attract the provision of section 271(1)(c) ? (ii) Whether the procedure for the levy of penalty was legally complied with when the Inspecting Assistant Commissioner did not issue a notice under section 274 before the completion of the assessment ?

Summary

Issues:
1. Whether the assessees deliberately furnished inaccurate particulars of income to attract penalty under section 271(1)(c) of the Income-tax Act?
2. Whether the procedure for the levy of penalty was legally complied with by the Inspecting Assistant Commissioner?

Analysis:

Issue 1:
The judgment pertains to two income-tax references involving two assessees, Bakshi Mohd. Yusuf and Bakshi Mohd. Shafi. Both assessees were partners in different firms and did not show their share of profits in their income tax returns, leading to penalty imposition by the Inspecting Assistant Commissioner. The Tribunal confirmed the penalties, citing deliberate furnishing of inaccurate particulars of income. However, the High Court analyzed the case in light of section 271(1)(c) of the Income-tax Act. The court emphasized the requirement of deliberate and wilful conduct for penalty imposition. The court referred to a previous Division Bench decision and the Supreme Court's ruling in Commissioner of Income-tax v. Anwar Ali to establish the necessity of sufficient evidence of deliberate concealment or culpable negligence. The court concluded that the assessees' errors in not disclosing their share of profits did not amount to deliberate misconduct, especially since the returns were duly signed and verified. The court rejected the Tribunal's reasoning based on the amendment to section 271, emphasizing that the deletion of "deliberately" did not alter the requirement of deliberate conduct. Ultimately, the court held that penalty under section 271(1)(c) was not applicable in these cases, and the penalties were to be deleted.

Issue 2:
Regarding the second issue of whether the procedure for the levy of penalty was legally complied with, the High Court noted that question No. 2 related to this point was withdrawn by the counsel and not pressed. Therefore, the court's order was confined to addressing question No. 1, which focused on deliberate furnishing of inaccurate particulars of income. As a result, the court did not provide an opinion on the procedural compliance aspect, as it was not pursued by the parties. The judgment solely focused on the substantive issue of deliberate misconduct in furnishing income particulars under section 271(1)(c) of the Income-tax Act.

In conclusion, the High Court ruled in favor of the assessees, holding that penalty under section 271(1)(c) was not exigible in both cases due to the absence of deliberate misconduct. The court's decision was based on the requirement of deliberate and wilful conduct for penalty imposition, as established by legal precedents and the interpretation of the relevant provisions of the Income-tax Act.