Calcutta H.C : Whether, in the facts and circumstances of the case, the Tribunal was justified in law in directing the imposition of any penalty under s. 271(1)(c) r/w s. 274(2) of the IT Act, 1961, on the assessee ?

Counsel Appeared

P.K. Pal with A.S. Lahiry, for the Petitioner : A.K. Sen Gupta with Prabir Kumar Majumdar, for the Revenue

SUDHINDRA MOHAN GUHA, J. :

In this reference under s. 256(2) of the IT Act, 1961, at the instance of the assessee, the question involved is as follows:

“Whether, in the facts and circumstances of the case, the Tribunal was justified in law in directing the imposition of any penalty under s. 271(1)(c) r/w s. 274(2) of the IT Act, 1961, on the assessee ?”

2. The assessment year involved was 1964-65. The assessee was an individual. The business, according to the return filed, was in the name and style of D.N. Mitra & Co. In making the assessment, the ITO brought to tax an amount of Rs. 22,944 as representing the income of Hindusthan Trading Corporation, a concern which was said to belong to the assessee’s wife, and in respect of which the income shown by the assessee’s wife was Rs. 9,154. The assessee’s wife had also shown in Sec. F of the return filed by her, hundi loans of Rs. 62,500. The ITO brought this amount, which appeared as credits in the books of Hindusthan Trading Corporation, to tax as undisclosed sources of income of the assessee. He also disallowed interest relating thereto of Rs. 13,661. In bringing the income shown by Hindusthan Trading Corporation of Rs. 9,154 to tax in the assessee’s bands, the ITO observed that the facts and circumstances of the case had been detailed in the assessment orders for the earlier years, that is, the asst. yrs. 1962-63 and 1963-64 and on the basis of the said facts the income had to be included in the present assessment of the assessee. So far as the hundi loans were concerned, he stated that summons were issued to all the creditors but they came back unserved and the assessee was given an opportunity to produce the parties, but they did not reply. He also stated that the identity of the creditors could not be established and, much less, their credit worthiness. In these facts and circumstances, the ITO brought to tax the peak amount of Rs. 62,500 and also disallowed the interest amount of Rs. 13,790. The ITO also brought to tax another amount of Rs. 13,791 interest on all credits in the suspense account.

3. There was an appeal to the AAC against the addition which failed. In the penalty proceeding the IAC invoked the provision of the Explanation appended to s. 271(1)(c) as the difference between the returned income and the assessed income was more than 20 per cent. He held that the assessee failed to discharge the onus under the Expln. to s. 271(1). He, therefore, imposed the penalty of Rs. 14,903 under s. 271(1)(c) of the Act.

4. The assessee came up in further appeal to the Tribunal in the quantum matter against the order of the AAC. Similarly, there was another appeal against the penalty imposed by the IAC. Both the appeals were heard and disposed of by the Tribunal by the self same order. The Tribunal upheld the addition for assessment purpose.

5. In appeal against the order of the IAC, it was submitted by the learned counsel for the assessee that no penalty could be imposed as the cash credit of Rs. 62,500 was shown by the wife of the assessee in Sec. F of her return and there was no question of the assessee having concealed any income. It was also asserted that the business of the Hindusthan Trading Corporation belonged to the wife and not to the assessee. Lastly, the quantum of penalty imposed was said to be excessive.

6. On behalf of the Department, on the other hand, it was contended that the sum of Rs. 62,500 not having been shown by the assessee in the return was a clear case of concealment. On hearing both parties, the Tribunal observed that the wife had shown the credit of Rs. 62,500 in Sec. F of the return, that there was really no concealment in this regard even by the assessee, and that, in any case, the Department had not established the income or the Revenue nature of the credits. The Tribunal further observed that some confirmatory letters had been filed which had not been shown to be false. It could not, therefore, according to the Tribunal, be said that the payment of interest was proved to be false. The Tribunal held that, as far as the credits and interest thereon were concerned, the ratio in the case of CIT vs. Anwar Ali (1970) 76 ITR 696 (SC), was applicable and no penalty could be imposed in respect of the same. Similar view was taken by the Tribunal with respect to the addition in the suspense account with respect to the inclusion of the income of Rs. 9,154 from the Hindusthan Trading Corporation in the hands of the assessee and the Tribunal observed that the ITO had made a detailed investigation in this regard in the asst. yr. 1962-63 and had come to a certain conclusion, which had not been negatived by the assessee by any evidence, and the ITO had come to the conclusion that the concern really belonged to the assessee. The Tribunal further observed that, even for the inclusion of the benami income for assessment purposes, the onus of proving that the business was benami was on the Department and as the Tribunal had upheld the addition of Rs. 91,154 for assessment purposes it had come to the conclusion that the Department had discharged that onus cast upon it for proving that the income belonged to the assessee. The Tribunal held that in view of this the penalty provisions were attracted. Looking to all the circumstances of the case, however, the Tribunal considered that the penalty imposed was excessive. The Tribunal, therefore, directed that the penalty should be reduced to the minimum imposable under the law and allowed the appeal in part.

7. On the above facts and circumstances of the case, as directed by this Court, the question as referred to above, came up for our opinion.

8. Mr. Pronab Pal, learned counsel appearing for the assessee, points out that the cash credits of Rs. 62,500 were shown by Smt. Bhadra Mitra, wife of the assessee in Sec. F of the return filed by her and there was, therefore, no question of the assessee having concealed any income. Such contention was upheld by the Tribunal. In the circumstances, it was contended that, the question of benami would not arise in this case. Moreover, there were no unimpeachable evidence from which it could be concluded that Hindusthan Trading Corporation did not belong to Smt. Bhadra Mitra, wife of the assessee, but belonged to the assessee himself.

9. Mr. A.K. Sengupta, learned counsel for the Revenue, argues that the ITO had come to a conclusion that the concern belonged to the assessee. He had made a detailed investigation in this regard in the asst. yr. 1962-63 and had come to certain conclusions and the assessee had not negatived the assumption made by the ITO by any evidence at any stage. The Tribunal, according to him, had earlier upheld the addition of Rs. 9,154 for assessment purposes and as such it had come to a conclusion that the Department had discharged the onus cast on it by proving that the income belonged to the assessee. In this view of the matter, the penalty provisions, in the opinion of the Tribunal, were attracted. In coming to such a conclusion, the Tribunal made a fuller discussion in para. 5 at pp. 36 to 38 of the paper book which we prefer to quote here : “The case of the assessee as well as that of his wife, Bhadra Mitra, were being assessed by the same ITO. There is no merit in the plea that there is any double assessment since Bhadra Mitra’s assessment for this year has been cancelled and both the parties have not contested the decision of the AAC in her case any further. The question of inclusion of the income of Hindusthan Trading Corporation in the hands of the assessee had come up for consideration for the first time in the asst. yr.

1962-63. The ITO had examined the issue in great detail in his order dated 21st March, 1967, for the asst. yr. 1962-63. He found that the introduction of capital in the business of Hindusthan Trading Corporation which is said to have come from loans repaid by the assessee to his wife could not be proved conclusively. He further stated that the nature of the business of the concern consisted in purchase and sale of raw oil which was an essential ingredient of soap manufacturing business carried on by the assessee. On investigation, he came to know that the trade licence of the concern was taken in the name of an employee, Mriganka Bh. Ghose who could not give any satisfactory explanation for licence being in his name except that he frequently visited the Calcutta Corporation on behalf of Hindusthan Trading Corporation. The shop rent of Rs. 20 p.m. was paid to this employee, who had taken the entire premises on rent at Rs. 90 p.m. when his salary was only Rs. 70 p.m. The ITO also examined some of the creditors of the concern and it was stated by some of them that they knew the concern of Hindusthan Trading Corporation to be one owned by the assessee. There were also certain discrepancies noticed on the signature on some bills which, according to the ITO, would go to link the assessee with the concern. For these reason she considered the concern to belong to the assessee in the asst. yr. 1962-63 especially as the lady, when summons was issued to her, claimed exemption and did not appear. In the appeal for that year it was stated on behalf of the assessee that there was very little evidence available to contest the action of the ITO treating the income as belonging to the assessee. The position in 1963-64 was similar and before us also for this year no evidence has been led to controvert any of the findings of the ITO. We are, therefore, to hold that the inclusion of the income of Hindusthan Trading Corporation in the hands of the assessee is in order.”

10. Thus, in view of the findings of the Tribunal, we are of the opinion that there should not be any doubt that the wife of the assessee was a mere benamidar of her husband. Any of the findings of the Tribunal, as stated earlier were not even assailed by the assessee. In this view of the matter we hold that the Tribunal was perfectly justified in its finding in favour of the Department. We would prefer to answer the question, which was though framed otherwise, in the following manner.

11. In the facts and circumstances of the case, the Tribunal was justified in law in upholding the order of imposition of penalty under s. 271(1)(c) r/w s. 274(2) of the IT Act, 1961, on the assessee and we direct the computation of penalty in the manner it was done by the Tribunal. Each party to pay and bear its own costs.

SABYASACHI MUKHARJI, J. :

I agree.

[Citation : 141 ITR 358]