Bombay H.C : Whether, on the facts and in the circumstances of the case, the assessee-company had concealed the particulars of its income or deliberately furnished inaccurate particulars of such income in regard to the claim for deduction of interest of Rs. 1,40,137 for the asst. yr. 1956-57 ?

N.A. Dalvi i/b H.V. Mehta & Co., for the Assessee : G.S. Jetly with Manjula Singh & C.K. Krishnan, for the Revenue

SUGLA, J.:

The following question of law has been referred to this Court by the Tribunal at the instance of the assessee :

” Whether, on the facts and in the circumstances of the case, the assessee-company had concealed the particulars of its income or deliberately furnished inaccurate particulars of such income in regard to the claim for deduction of interest of Rs. 1,40,137 for the asst. yr. 1956-57 ? “

2. The assessee is a company. The proceedings relate to its assessment for the asst. yr. 1956-57. The assessee had in its books an account in the name of Ramchandra Ramkumar in which there was an opening credit balance of Rs. 22,99,686. By crediting the said account with Rs. 1,40,137 on account of interest, the assessee debited the same to the interest account and claimed deduction. The Departmental authorities as well as the Tribunal found that the said concern was not established to be genuine and no interest was paid or was payable by the assessee to the said concern on the said opening credit balance. Accordingly, the assessee’s claim for deduction in this behalf was disallowed by the ITO and the disallowance was confirmed both by the AAC and the Tribunal.

3. The ITO initiated penalty proceedings under s. 28(1)(c) of the Indian IT Act, 1922, and, after allowing the assessee an opportunity of being heard, imposed a penalty of Rs. 32,554. For this purpose, the ITO mainly relied on the following findings given by the AAC which were confirmed by the Tribunal: (a) That no person by the name of Ramchandra Ramkumar existed. (b) That these funds in the name of Ramchandra Ramkumar were identified with the Jalan Group, which in turn comprised the company. (c) that there was the authority of the Investigation Commission for the identification of the funds of Ramchandra Ramkumar with the Jalans. (d) That there was no stipulation of interest payment on the funds employed in the company. (e) That no question of payment of interest arose which was consistent with the position that the interest was left undrawn in the company’s accounts. He also referred to the fact that in identical circumstances, penalties imposed by the Departmental authorities were confirmed by the Tribunal under s. 28(1)(c) of the Indian IT Act, 1922, and s. 271 (1)(c) of the IT Act, 1961, on the assessee for the subsequent asst. yrs. 1958-59 to 1963-64.

Shri Dalvi, learned counsel for the assessee, has taken us through the findings given by the AAC to show that the Investigation Commission had held that the amounts standing to the credit of Ramachandra Ramkumar in the books of the assessee-company belonged to the Jalan Group. According to him, the fact that the Jalan Group might be or might not have been controlling the assessee-company was not very material. In the eye of law, the Jalan Group could not certainly be identified with the assessee-company. Therefore, the short question continues to remain whether interest was payable by the assessee to this concern on the credit balance of Rs. 22,99,686 and in case it is held that it was not payable, whether the assessee claimed the deduction with the knowledge that it was not payable. In support of his contention, Shri Dalvi strongly relied on the Supreme Court decision in the case of CIT vs. Anwar Ali (1970) 76 ITR 696(SC), where it was held that under s. 28(1)(c) of the Indian IT Act, 1922, the mere fact that there was no evidence on record except the explanation given by the assessee, which explanation had been found to be false, did not lead to the conclusion that the assessee was guilty of concealment within the meaning of s. 28(1)(c). Shri Jetly, learned counsel for the Department, on the other hand, submitted that the Supreme Court decision is not applicable to this case. The additions involved in that case were of amounts received. The question of deduction in respect of expenditure would stand on a different footing. He invited our attention to the findings of the Tribunal that there was not even an oral stipulation to pay interest on the credit balance standing in the account of Ramchandra Ramkumar. The Tribunal has thus found that no interest was payable by the assessee and yet the assessee claimed deduction in respect thereof with the knowledge that it has no such liability. In the above view of the matter, we are satisfied that the conclusion arrived at by the Tribunal that the assessee had concealed its income to the extent of Rs. 1,40,137 by wrongly claiming the deduction is a finding of fact based on cogent material.

In the result, the question referred to us is answered in the affirmative and against the assessee. The assessee will pay the costs to the Revenue.

[Citation : 169 ITR 504]