1983 (7) TMI 341 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 271(1)(c) of the Income-tax Act, 1961 regarding imposition of penalty on the assessee.
2. Assessment of penalties imposed by the departmental authorities for the assessment years 1965-66 and 1966-67.
3. Analysis of the Tribunal's decision to set aside the penalty orders based on the explanation appended to section 271(1)(c).
4. Evaluation of the initial onus of proof on the assessee and the revenue in penalty proceedings.
5. Consideration of relevant case laws like CIT v. Anwar Ali, CIT v. Parmanand Advani, Vishwakarma Industries v. CIT, CIT v. Patna Timber Works, and CIT v. Tata Services Ltd.

The High Court of Patna heard references under section 256(2) of the Income-tax Act, 1961, regarding the imposition of penalties on the assessee. The main question was whether the Tribunal was correct in setting aside the penalty orders imposed by the departmental authorities under section 271(1)(c) of the Act. The assessee, a registered firm, was involved in assessment years 1965-66 and 1966-67. For 1965-66, the total income was reduced to Rs. 1,11,828 after various adjustments, and for 1966-67, it was reduced to Rs. 99,626 after appeals. The Income Tax Officer (ITO) initiated penalty proceedings under section 271(1)(c) for both years, resulting in penalties of Rs. 13,100 and Rs. 6,000 imposed by the Income-tax Appellate Commissioner (IAC). The Tribunal, after considering the case, found that penalties could not be imposed based on settled law post the Supreme Court decision in CIT v. Anwar Ali [1970] 76 ITR 696, especially regarding cash credits and expenses.

The revenue representative argued that the Tribunal's decisions were erroneous post the insertion of the Explanation to section 271(1)(c), shifting the initial burden of proof to the assessee. However, the Court found that the initial onus had been discharged by the assessee based on available records for both years. The Court referenced various cases like CIT v. Parmanand Advani, Vishwakarma Industries v. CIT, CIT v. Patna Timber Works, and CIT v. Tata Services Ltd., emphasizing settled principles. The Court concluded that the Tribunal was justified in setting aside the penalty orders under the Explanation to section 271(1)(c). The question referred to the Court was answered affirmatively, supporting the Tribunal's decision. No costs were awarded in this case.