High Court Of Allahabad
Pandit Govind Prasad Mishra vs. CIT
Sections 271(1)(c), 274
Asst. Year 1971-72, 1972-73
S.L. Saraf & Ikram-Ul-Bari, JJ.
IT Ref. No. 289 of 1981
24th February, 1999
Vikram Gulati, for the Assessee : Shambhu Chopra, for the r Commissioner
S.L. SARAF, J. :
At the instance of the assessee, the Tribunal has referred under s. 256(1) of the IT Act, 1961, the following question of law for the opinion of this Court : “Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in pholding the imposition of penalty under s. 271(1)(c) of the IT Act, 1961, in respect of both the years under reference ?” The facts of this case in a nutshell are that the assessee is an individual and was assessed for the asst. yrs. 1971-72& 1972-73. In the return for the asst. yr. 1971-72, the income from property was shown as Rs. 1,750 whereas income from the business was shown as Rs. 1,200. The assessee was assessed on the income of Rs. 11,750 for that year. Similarly, for the asst. yr. 197273 , the assessee filed its return showing the income from house property as well as business income as nil. For that year the assessee was assessed at the income of Rs. 11,750. The difference in the business income disclosed by the assessee and determined by the ITO was due to estimation of income from two trucks, namely, UPF-405 and UPF-444 plied during the relevant previous years. As regards truck No. UPF-405; the assesseeâs case was that the same belonged to his minor son, Vijay Kumar, and therefore, the income from the said truck did not belong to him. As regards truck No. UPF-444, the assessee claimed that the said truck was exploited in partnership with two other persons. On the material gathered during the course of assessment proceedings, the ITO came to the conclusion that truck No. UPF-405 was purchased by the assessee in the name of his minor son. As regards the other truck the ITO found that the same was not exploited in partnership as alleged by the assessee. The findings of the ITO in respect of both the trucks were upheld by the Tribunal.During the course of assessment proceedings, the ITO initiated proceedings under s. 274/271(1) (c) of the IT Act,1961, and issued notices to the assessee to show cause as to why penalty should not be imposed on him under s.271(1)(c) of the Act. In his letter dt. 19th March, 1976, the assessee requested the ITO to drop the penalty proceedings in respect of the asst. yr. 1971-72 on the ground that the assessee had not concealed any fact or material and had disclosed all the facts at the time of assessment. The income from truck No. UPF-405 belonged to his minor son and, as such, the minor son had filed a separate return of income though the ITO had clubbed the said income in the hands of the assessee. There was no mens rea on the part of the assessee. The Tribunal had reduced the amount of taxability of the assessee while confirming the order of the ITO holding that no penalty could be imposed without establishing the mens rea. However, the ITO was not satisfied with the reply of theassessee and confirmed the penalty imposed on the assessee. As against the said order an appeal was filed before the AAC who held that in the penalty proceedings the burden was on the Department to prove the fact and establish beyond reasonable doubt that the assessee had concealed the particulars of income. Merely because the assessment has been completed on a higher income which has been partly confirmed in appeal by the appellate authorities, the addition does not mean that the facts were completely proved because the assessment could be made for non-production of evidence which is entirely a different matter than penalty proceedings. The case of the ITO is based on presumption. The Department had failed to prove that there was concealment on the part of the assessee, as such, the penalty proceedings could not be sustained and the penalty proceedings were cancelled.As against the said order, the Revenue went up in appeal before the Tribunal, who however without expressing any opinion as to whether there was any deliberate concealment on the part of the assessee to suppress or conceal any income, held that the provisions of the Explanation to s. 271(1)(c) of the Act would clearly be attracted in view of the decision reported in CIT vs. Zeekoo Shoe Factory (1979) 10 CTR (All) 307 : (1981) 127 ITR 837 (All) : TC 50R.83 : (1978) UPTC 608.We have carefully considered the submission put forward by learned counsel for the assessee and the Revenue. In order to appreciate the submissions of the parties, we set out the provisions of s. 271(1)(c) of the IT Act, 1961, which read as follows : “271. (1) If the ITO or the AAC or the CIT(A) in the course of any proceedings under this Act, is satisfied that any personâ (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penaltyâ (iii) in the cases referred to in cl. (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. Provided that, if in a case falling under cl. (c), the amount of income (as determined by the ITO on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the ITO shall not issue any direction for payment by way of penalty without the previous approval of the IAC.” A reading of this section makes it abundantly clear that the amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income are disclosed, no penalty proceedings could be initiated.Learned counsel for the applicant has cited a decision reported in CIT vs. Anwar Ali (1970) 76 ITR 696 (SC) : TC50R.276, wherein the Supreme Court has been pleased to hold that the proceedings under s. 28 of the Indian IT Act, 1922, are penal in character. The gist of the offence under s. 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden is on the Department to establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false, does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income an that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars.In the other decision reported in Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC) : TC 49R.330, wherein the upreme Court has been pleased to hold that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted eliberately in efiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances.In Cement Marketing Co. of India Ltd. vs. Asstt. CST (1980) 124 ITR 15 (SC), wherein it was held by theSupreme Court that a return cannot be “false” unless there is an element of deliberateness to be due to want of care on the part of the assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the Court may, in a given case, infer deliberation and the return may be liable to be branded as a false return. But where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a “false” return inviting imposition of penalty.In the facts of the present case, admittedly, a return was filed by the assessee and a separate return was also filed by his minor son for the income from truck No. UPF-405. In that view of the matter, there was no concealment of income on the part of the assessee. The assessee was under a mistaken belief that the income derived from the income of minor son can be assessed as the income of the minor and not as the income of the assessee. The facts disclosed show that there was no deliberate concealment on the part of the assessee. The imposition of penalty under s. 271 (1)(c) by the ITO was based on assumption and presumption and on the basis that since the explanation of the assessee was found not to be correct, the penalty proceedings were called for. The authorities did not make any attempt to prove as to whether there was any deliberate concealment on the part of the assessee. In that view of the matter, the order passed by the Tribunal is bad and is not sustainable at law. As such, the question raised in the reference is answered in the negative, in favour of the assessee and against the Revenue. There will be no order as to costs.
[Citation : 238 ITR 338]