Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross examination is sufficient to discard his statement. Fifthly, statements recorded under Section 4 of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v.
Harjeev Aggarwal supra. Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v.
CIT supra where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr.
Anu Aggarwal or Mr. Harjeet Singh contained any such admission. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by Shri Tarun Goyal in his statement.
To the same effect is Delhi high court decision in case of N. Cables ITR Page The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if the assessee is unable to proffer a credible explanation, the Assessing Officer may legitimately raise an inference against the assessee. If, however, the assessee furnishes all relevant facts within his knowledge and offers a credible explanation, the onus reverts to the revenue to prove that these facts are not correct.
The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, involved particularly when the question is one of taxation, under a deeming provision.
Further a deeming provision requires the Assessing Officer to collect relevant facts and then confront the assessee, who is thereafter, required to explain incriminating facts and in case he fails to proffer a credible information, the Assessing Officer may validly raise an inference of deemed income under section A. As already held, if the assessee proffers an explanation and discloses all relevant facts within his knowledge, the onus reverts to the revenue to adduce evidence and only thereafter, may an inference be raised, based upon relevant facts, by invoking the deeming provisions of Section A of the Act.
It is true that inferences and presumptions are integral to an adjudicatory process but cannot by themselves be raised to the status of substantial evidence or evidence sufficient to raise an inference. A deeming provision, thus, enables the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions.
Madras high court in case of S. Ahmed Hussain.. Respondent T ax Case Appeal No. After the insertion of the Explanation, it cannot be said that the onus lies on the Revenue to establish mens rea for concealment of income before imposition of penalty. If there was failure to return the correct income, there would be a presumption of concealment, unless the Assessee was able to prove that his failure to return his correct income was not due to fraud or neglect. Delhi high court has echoed different sentiments in next mentioned decisions:.
The Supreme Court held, in Shri T. Ashok Pai v. In other words, the levy of penalty under this provision is not automatic. This view has been reiterated in Union of India v. Rajasthan Spinning and Weaving Mills, 13 SCC to say that for there to be a levy of penalty under Section 1 c , the conditions laid out therein have to be specifically fulfilled.
Section 1 c of the Act, being in the nature of a penal provision, requires a strict construction. While considering the interpretation of this provision, this Court in Commissioner of Income Tax v. Unless the case falls within the four-corners of the said provision, penalty cannot be imposed. Subsection 1 of Section stipulates certain contingencies on the happening whereof the AO or the Commissioner Appeals may direct payment of penalty by the Assessee. Earlier decisions indicated a conflict of opinion as to whether Section 1 c required the revenue to specifically prove mens rea on the part of the assessee to conceal his income.
Nonetheless, even post the amendment, the Apex Court in K. Builders v. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure, cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon.
In order that a penalty under Section 1 c may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. This was also the conclusion of the Supreme Court in the case of Dilip N. Shroff Karta of N. Shroff v. In a later decision in Union of India v.
Shroff supra. Thereafter, in Commissioner of Income Tax v. Reliance Petroproducts Pvt. But, it does not follow that penalty for concealment must be imposed as the quantum appeal is decided against the assessee. The findings in the assessment proceedings cannot be considered as conclusive and final for the purpose of imposition of penalty under section 1 c of the Act. Anwar Ali [] 76 ITR SC such findings may constitute good evidence in the penalty proceedings but it does not follow that penalty for concealment under Section 1 c is mandatory whenever an addition or disallowance is made.
The language of Section 1 c has undergone substantial changes since the pronouncement of the aforementioned judgment, but the said legal position, still hold good. In assessment proceedings, we are primarily concerned with the assessment of income i.
Penalty is imposed not because addition is made but because there is concealment or furnishing of inaccurate particulars by the assessee. This is apparent from language of Section 1 c and Explanation 1 which are reproduced below Failure to furnish returns, comply with notices, concealment of income, etc.
Explanation 1. A such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Deputy Commissioner Appeals or the Commissioner Appeals to be false, or. B such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause c of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.
It amounts to suppression of truth or a factum so as to cause injury to the other. See CIT vs. It means to hide or withdraw from observation; to cover or keep from sight; to prevent discovery of; to withhold knowledge of.
It may refer to particulars which should have been furnished or were required to be furnished or recorded in the books of accounts etc. Raj Trading Co. The powers under the provision cannot be used by the Assessing Officer merely to shift his responsibility of scrutinizing the accounts to the special auditor. Before granting the approval, the Commissioner or the Chief Commissioner, must have before him the materials on the basis of which the opinion has been formed by the Assessing Officer.
The approval granted by the Commissioner or the Chief Commissioner must reflect application of mind to the facts of the case. Under this section, the Commissioner of Income Tax does not exercise the jurisdiction of the appellate authority rather the approving authority.
Approval means and connotes supporting and accepting of an act and conduct done by another person. Therefore, it would be his duty to examine on receipt of his proposal, whether the Assessing Officer has correctly done it or not, if he finds that this requirement has not been fulfilled then he must not approve of the same. While this decision of the Supreme Court was prior to the amendments inserted by the Finance Act, , this Court sees no reason as to why these holdings of the Supreme Court in Sahara supra would not be applicable to the amended Section 2A.
It would still be impermissible for the AO to shift the responsibility of auditing the accounts mechanically to the special auditor. Ltd has held on Whether in respect to tax dues or other public revenue or in other cases, if one has to discard the corporate personality, then the initial burden would lie upon it to place on record relevant material and facts to justify invocation of doctrine of lifting of veil and to plead that the corporate shell be not made a ground of defence.
A personality conferred by the statute cannot be overlooked or ignored lightly and in a routine manner or on a mere asking. In effect the attempt of those individuals have to be shown akin to fraud or misrepresentation. The legal personality of the corporate body thus can be ignored in such cases since it is well settled that fraud vitiates everything and, therefore, the benefit of legal personality obtained by someone for purposes other than those which are lawful or even if lawful but not otherwise permissible, the corporate personality being the result of such fraudulent activity would have to be discarded but not otherwise.
These are the things based on positive factual material and cannot be presumed in the absence of proper pleadings and material to be placed by the person who is pleading to invoke the doctrine of piercing the veil and to ignore the juristic personality of the corporate body. Essar Oil Ltd. The assessee has specifically denied the receipt of such an interest income.
The Revenue has not made any enquires to find out whether the AIR information was correct or not. It has been held time and again by this Tribunal that the additions made solely on the basis of AIR information are not sustainable in the eyes of law. If the assessee denies that it is in receipt of income from a particular source, it is for the AO to prove that the assessee has received income as the assessee cannot prove the negative. Shree G.
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Corporate and commercial. Australian discretionary trusts may not be an optimal structure for holding assets where capital gains are to be distributed to foreign beneficiaries. This section provides that taxpayers bear the burden of proving, on the balance of probabilities, that: the assessment is excessive; and what the assessment should have been in order to be correct or " more nearly right " 1.
Contact Peter Harkin Partner. Toby Blyth Partner. Stuart McKenzie Special Counsel. John Nolan Senior Associate. In a later blog entry, we will discuss in more detail the procedures for shifting the burden of proof under Section For any questions on the burden of proof in a tax case or any other tax-related matters, please feel free to contact Joel Crouch at or jcrouch meadowscollier.
Joel N. Crouch View Bio. By statute the IRS automatically has the burden of proof in the following situations: Tax related criminal cases. As with all criminal cases, the government has the burden of proof in a criminal tax case. Civil fraud cases. In any civil proceeding involving the issue whether a taxpayer has been guilty of fraud with intent to evade tax, the IRS has the burden of proof.
IRC Section a. Verification of amounts shown on information returns. In any court proceeding, if a taxpayer asserts a reasonable dispute with respect to any item of income reported on an information return filed with the IRS by a third party and the taxpayer has fully cooperated with the IRS, the IRS has the burden of producing reasonable and probative information concerning such deficiency in addition to such information return. IRC Section d. Preparer penalty. In any proceeding involving the issue of whether or not a tax return preparer has willfully attempted in any manner to understate the liability for tax, the IRS bears the burden of proof.
IRC Section Accumulated and profits of corporations. In any proceeding before the Tax Court involving a notice of deficiency based in whole or in part on the allegation that all or any part of the earnings and profits have been permitted to accumulate beyond the reasonable needs of the business, the burden of proof with respect to such allegation shall generally be on the IRS.
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