Gujarat H.C : Whether the Tribunal is right in law in confirming the penalty only in respect of an amount of Rs. 31,000 and thereby cancelling the balance penalty levied under s. 271(1)(c) of the IT Act, 1961 ?

High Court Of Gujarat

CIT vs. Lallubhai Jogibhai Patel

Section 271(1)(c)

R.K. Abichandani & A.L. Dave, JJ.

IT Ref. No. 183 of 1988

23rd January, 2003

Counsel Appeared

B.B. Naik, for the Petitioner : Manish J. Shah for J.P. Shah, for the Respondent


R.K. Abichandani, J. :

The Tribunal, Ahmedabad Bench “C”, has referred the following question for the opinion of this Court under s. 256(1) of the IT Act, 1961 :

“Whether the Tribunal is right in law in confirming the penalty only in respect of an amount of Rs. 31,000 and thereby cancelling the balance penalty levied under s. 271(1)(c) of the IT Act, 1961 ?”

2. During the course of operation under s. 132 of the Act on the 30th Nov., 1974, a Mercedez car was found parked in the premises of the assessee. The registration book, a servicing bill and a blank transfer form signed by the owner of the vehicle were also recovered from the premises. As the assessee did not disclose the source of income by which he had acquired the said vehicle, an amount of Rs. 65,000, representing the investment, was added to the total income of the assessee and a notice under s. 274 r/w s. 271 was issued to show cause as to why penalty under s. 271(1) (c) should not be levied on the assessee. The addition to the total income in respect of the investment in the car was, ultimately, scaled down to Rs. 56,000 by order dt. the 19th March, 1983, passed by the CIT(A). The assessee, in response to the notice, kept on shifting his stand, in his letters dt. 16th Jan., 1980, and 25th Feb., 1980, he stated that the car was purchased only for Rs. 31,000. The ITO, by his order dt. the 23rd Sept., 1983, held that the assessee had deliberately concealed the particulars of income to the extent of Rs. 56,000 utilized by him for acquiring the car and, therefore, was liable to penalty. The penalty equal to 100 per cent of the income concealed was imposed on the assessee. The CIT(A), before whom that order was challenged, decided, by his order dt. 2nd Jan., 1984, that the penalty under s. 271(1)(c) could not be imposed on the assessee because the ITO had not discharged the onus on him to show that, in the investment in the car, in the year of account, the assessee’s income of the year, which he had concealed, was involved. It was observed that, in the wealth-tax records of the assessee, he had returned a cash on hand of Rs. 75,000 and that he was assessed to wealth-tax exceeding Rs. 11,00,000. The CIT(A) observed that, whether the investment in the car would reflect any concealed income of the assessee in the year, being the question itself, it cannot be said that the provisions of Explanation to s. 271(1)(c) would be applicable to the facts of the case and that the penalty was to be examined within the framework of the main provisions of s. 271(1)(c). It was held that the onus was on the ITO to establish directly or indirectly that the investment in the car involves an income of the year under review which the assessee had not disclosed. He, therefore, cancelled the entire penalty of Rs. 56,000

The Tribunal, on the basis of the material on record, held that the CIT(A) was in error in cancelling the penalty. According to the Tribunal, the Explanation was attracted and it was for the assessee to lead necessary evidence so as to properly rebut the presumption. The Tribunal found that the income used in purchase of the car was income of the year under consideration and that the asset acquired was, admittedly, belonging to the assessee. The Tribunal, however, noted that the dispute centered around the determination of the value of the car which was upheld at Rs. 56,000 and that the amount, admittedly, paid for the purchase thereof was Rs. 31,000. It took into account the contention raised by the assessee in his letter dt. the 29th Aug., 1983, that the difference in value could not amount to concealment. It held that, regarding concealment to the extent of Rs. 31,000, it could be said that there was no dispute in view of the admission by the assessee and that, if at all there could be said to be some dispute it could be in relation to the amount in excess of Rs. 31,000, which involved a factor of estimate on the basis of evidence. The penalty was, therefore, upheld only in respect of Rs. 31,000 for concealment of income and the order of the CIT(A) was modified accordingly. The learned counsel appearing for the Revenue argued that the Explanation to cl. (c) of s. 271 (1) was attracted in this case and the entire amount of Rs. 56,000, being the price of the car purchased, should be treated to have been an income deemed to have been concealed under the Explanation. It was submitted that, once a presumption arose under the Explanation, the minimum penalty of 100 per cent of the amount concealed was called for and, therefore, the Tribunal ought to have restored the entire penalty of Rs. 56,000 and not mere Rs. 31,000.

6. There can be no dispute about the fact that the Explanation to s. 271(1)(c) is a part of s. 271 and, therefore, it applied notwithstanding that it may not have been separately mentioned. This point is, now, concluded by the decision of the Supreme Court in K.P. Madhusudhanan vs. CIT (2001) 169 CTR 489 : (2001) 251 ITR 99 (SC). It is, however, clear that the presumption is not irrebutable and from the material on record, the assessee can show that there was no concealment. The assessee, by his two letters referred to hereinabove, admitted that he had purchased the car for Rs. 31,000 and, therefore, that was a valid basis on which the Tribunal held that there, admittedly, was concealment of income to the tune of Rs. 31,000. As regards the amount which was in excess of Rs. 31,000, the Tribunal has found that it was a mere estimate by the ITO while fixing the amount that went into purchase of the car. The finding of the Tribunal that the amount which was in excess of Rs. 31,000 involved a factor of estimate, on the basis of lack of evidence, cannot be said to be a perverse or unreasonable finding. We, therefore, hold that the Tribunal was right in law in confirming the penalty only in respect of an amount of Rs. 31,000 and cancelling the balance penalty levied under s. 271(1)(c) of the IT Act, 1961. The question referred to us is, therefore, answered in the affirmative, against the Revenue and in favour of the assessee. The reference stands disposed of accordingly. There shall be no order as to costs.

[Citation : 261 ITR 216]

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