Case Law Details
JUDGMENT Fathima Beevi, J.
1. This reference under Section 256(2) of the Income-tax Act arises for the assessment year 1969-70. A penalty of Rs. 3,13,877 levied under Section 271(1)(c) of the Act by the Inspecting Assistant Commissioner was cancelled by the Income-tax Appellate Tribunal. The following questions of law are referred as directed by this court at the instance of the Revenue :
“1. Whether, on the facts and in the circumstances of the case and in view of the fact that the assessee has agreed in writing to the addition of the concealed income of Rs. 2,33,687 and also to the levy of penalty, the Income-tax Appellate Tribunal is right in law in deleting the penalty ignoring the admission made by the assessee ?
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in finding that there is no concealment in respect of income from interest on gold and D.P.N. loans and is not this finding wrong and unreasonable and based on surmises only ?
3. Whether, on the facts and in the circumstances of the case, there were materials for the Tribunal to hold that there is double addition to the extent of Rs. 53,831 being interest on deposits in fictitious names and is not the said finding wrong and unreasonable in law ?
4. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in finding that ‘there is no evidence at all of concealment of Rs. 1,56,797’ and is not the finding based on surmises only and hence perverse and unreasonable ? “
2. The assessee, a registered firm, engaged in the business of running chitties, returned an income of Rs. 3,92,391 on December 31, 1969. This included interest on loans advanced out of chitty funds to a sister concern doing banking business (Rs. 53,831) and interest on advances outside the books (Rs. 80,190). On the basis of a settlement arrived at with the Department, the assessee agreed for consideration in the assessment for 1969-70, extra income of Rs. 2,33,687 made up of interest on bogus deposits (Rs. 1,56,797) and interest on advances outside the books (Rs. 76,890). The assessee also agreed to a penalty of 100% of that amount. The Income-tax Officer completed the assessment on January 31, 1972, by making the additions agreed to and computing the total income at Rs. 7,68,200.
3. The Inspecting Assistant Commissioner who initiated the penalty proceedings levied the penalty limited to that amount agreed upon on the basis that “the assessee concealed a minimum of that amount of income represented by the difference between the income originally returned and the figures finally assessed”.
4. The Appellate Tribunal in allowing the assessee’s appeal noticed that the assessee before filing the return had made a disclosure in the petition for settlement and had also in the covering letters attached to the return explained the sources of income and in the course of the proceedings furnished all relevant particulars relating to advances and deposits before the Income-tax Officer and finally agreed to the addition being made. The Tribunal, on examining the details, concluded that there had been no concealment of particulars in respect of income from advances outside the books or the interest income from bogus deposits and that no penalty is exigible merely on the agreement to penalty. The Tribunal also found that there was double addition of Rs. 53,831 as the total interest on bogus deposits was only Rs. 1,56,797. A copy of the order of the Tribunal dated May 11, 1976, is annexure E to the statement of the case.
5. Ordinarily, in penalty proceedings, the question of concealment is a question of fact and a finding of fact by the Tribunal will not be disturbed unless it is based on no material or is perverse or is based on irrelevant or extraneous considerations or is arrived at by the application of wrong principles of law. The learned counsel for the Revenue submitted that interference is warranted only because the Tribunal has wrongly cast the burden of proof on the Revenue in spite of the admission by the assessee that the addition made is the concealed income liable for penalty. He contended that when an amount of Rs. 2,33,687 had been surrendered by the assessee for assessment and also admitting liability for penalty, the Revenue has no burden to prove again that the assessee has concealed its income. The submission is that in the face of the assessee’s own admission that the amount in question represents concealed income, there is absolutely no other evidence required to show that the amount represents income and that it has been concealed from the return. It is also pointed out that this is a case where the Explanation to Section 271(1)(c) is attracted, the income returned by the assessee being less than what is assessed by more than 20% and it is, therefore, for the assessee to make out absence of fraud, etc. Reliance was placed on the decision in Durga Timber Works v. CIT [1971] 79 ITR 63 (Delhi), Western Automobiles (India) v. CIT [1978] 112 ITR 1048 (Bom), Banaras Chemical Factory v. CIT [1977] 108 ITR 96 (All) and India Sea Foods v. CIT [1978] 114 ITR 124 (Ker), in support of the contention that when the assessee concedes that a particular item of income is concealed, such a concession will justify the imposition of penalty. According to the Revenue, penalty had been levied for earlier assessment years on the basis of similar concession and the conclusion of the Tribunal for this year is perverse.
6. We are unable to accept these contentions. It is true that the disclosure made by the assessee covers the period from 1962-63 to 1969-70 and that for the earlier assessment years, penalty was found exigible. But the facts and circumstances for the year under consideration are totally different. What transpired for the earlier assessment years is, therefore, irrelevant. What is material is whether there had been concealment of income by the assessee for this year. The return was filed long after the assessee made the proposal for settlement conceding that it had income by way of interest on bogus deposits and advances outside the books. Part of that interest had been shown in the return and the explanatory note submitted along with the return revealed that the assessee had no intention to keep away from the Department any information relating to these sources. Before the assessment was completed, the assessee furnished full particulars and it is only on the basis of those particulars that the total addition to be made was settled and spread over the entire period. It is on an appraisal of all these details that the Tribunal has arrived at the finding that there had been no concealment and not on a misapplication of the rule of evidence.
7. Where the assessee for one reason or the other agrees or surrenders certain amounts for assessment, the imposition of penalty solely on the basis of the assessee’s surrender will not be well-founded. Depending upon the facts and circumstances of each case, the court has to decide whether penalty is justified. It is always for the Revenue to bring the case under the ambit of Section 271(1)(c) by establishing that there is concealment on the part of the assessee. The Explanation thereof inserted with effect from April 1, 1964, merely raises a rebuttable presumption, but the basic principle that there should have been concealment still remains. The legal fiction created by the Explanation can be displaced if there is material to show that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on the part of the assessee. As observed by the Delhi High Court in CIT v. Mohan Das Hassa Nand [1983] 141 ITR 203 (headnote):
” The whole purpose of Section 271(1)(c) was that where an assessee did not declare his proper income in the return and as a result thereof income could have escaped assessment but for the diligence or investigation of the Department, the assessee should be penalised when eventually the assessed income exceeds the returned income. But it would be incorrect to apply the penal provision in a case where, though the return did not show certain items of income, there was a simultaneous disclosure by the assessee and full knowledge of the Department regarding those other items of income which the assessee had earned. “
8. The assessee herein, in the absence of regular books of account, pending settlement with the Department filed the return disclosing the various sources of income and estimating interest from deposits and advances locked up in the accounts of the sister concern and conceded an addition after the proposals for settlement were finally accepted. In such circumstances, there is no warrant for the conclusion that there was concealment of which the assessee was conscious, from the assessing authorities.
9. Therefore, the Tribunal was justified in concluding that the penalty is uncalled for and in cancelling the same. Accordingly, we answer all the questions referred to us against the Revenue.
10. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be sent to the Income-tax Appellate Tribunal, Cochin Bench.
