"Concealment of income and furnishing of inaccurate particulars carry different connotations. Concealment refers to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppression or false declaration," the Apex Court said.
The order imposing penalty is quasi-criminal in nature and, thus, the burden lies on the department to establish that the assessee had concealed his income, a bench of Justices S B Sinha and Markandeya Katju said, while upholding an appeal filed by an assessee.
Appellant T Ashok Pai, an engineer, had challenged a judgement of the Karnataka High Court which rejected his plea that the alleged false assessment was prepared by the Syndicate Bank, his banker, to whom he had given the general power of attorney.
The high court had upheld the argument of the tax officials that if the explanation of Pai was to be accepted then every tax evader could take shelter by shifting the blame on his/her clerk or accountants.
However, the Apex Court held that if an explanation given by the assessee with regard to the mistake committed by him has been treated to be bona fide and it has been found that he had acted on the basis of wrong legal advice, the question of imposing a penalty does not arise.
Thus apart from his explanation being not bona fide, it should be established that the assessee has not disclosed all the facts which were material to the computation of his income, the bench said.
According to the Apex Court in an assessment proceeding it cannot be automatically construed that a particular receipt is income as defined under the Income Tax Act.
Though a finding in the assessment proceedings constitutes good evidence in the penalty proceedings, the authorities must consider the matter afresh as the question has to be considered from a different angle, the Apex Court said while upholding the appeal.
