Punjab & Haryana H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the IAC ceased to have any jurisdiction for imposing penalty under s. 271 (1) (c) after April 1, 1976 ?

Counsel Appeared

L.K. Sood, for the Revenue : D.K. Gupta, O.P. Goyal & S.S. Sular, for the Assessee

GOKAL CHAND MITAL, J. :

The Tribunal, Amritsar, has referred the following two questions at the instance of the Revenue :

” 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the IAC ceased to have any jurisdiction for imposing penalty under s. 271 (1) (c) after April 1, 1976 ?

2. Whether, on the facts and in the circumstances of the case, the, Tribunal was right in deleting the penalty of Rs. 78,216 imposed under s. 271 (1) (c) ?

“The Tribunal has also referred the following two questions at the instance of the assessee :

” (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the penalty order was not invalid on the ground that the show-cause notice for imposition of penalty had been served on one ex partner and not on all the three partners separately ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that penalty was leviable in respect of the addition of Rs. 17,838 which had been determined on estimated basis on suppressed sales ? “

2. We shall first deal with the question referred at the instance of the Revenue and the second question referred at its instance is consequential to the answer to question No. 1. One composite question could have been framed. The ITO, by assessment order dated September 9, 1975, made additions of income on various counts and in the same order observed as under : ” Proceedings under s. 274 r/w s. 271 (1) (c) of the Act have already been initiated for concealing the true particulars of his income. Penalty proceedings under s. 274 r/w s. 271 (1)(a) have also already been started. Charge interest under s. 139. “

3. Since on September 9, 1975, on the given facts, the imposition of quantum penalty was within the jurisdiction of the IAC, reference was made to him. By the time the IAC issued notice in the penalty proceedings, there was a change in the authority to levy the penalty w.e.f. April 1, 1976. The assessee challenged the levy of penalty by the IAC on the ground that when he issued notice and levied penalty, on both dates he did not have the jurisdiction to do so. The question arose as to on which date it will be deemed that the penalty proceedings were initiated whether, on September 9, 1975, when the ITO ordered so or when the notice was issued by the IAC after April 1, 1976. This controversy has been settled by a Full Bench of this Court in CIT vs. Mohinder Lal (1987) 61 CTR (P&H) 154 : (1987) 168 ITR 101, wherein it is held that the forum to levy penalty depends on the date when proceedings for penalty are initiated and they stand initiated when the ITO passes an order and not when the notice is issued by the IAC. In this case, proceedings were initiated by the ITO on September 9, 1975, and at that time, penalty could be levied by the IAC and not by the ITO, and, therefore, the levy of penalty by the IAC is valid.The Tribunal was in error in coming to the conclusion that the IAC ceased to have any jurisdiction for imposing penalty under s. 271(1)(c) after April 1, 1976. Accordingly, both the questions are answered in favour of the Revenue, that is, in the negative. Adverting to the first question referred at the instance of the assessee, the same arises on the following facts. The assessee-firm stood dissolved w.e.f. April 21, 1973. The penalty proceedings herein relate to the asst. yr. 1972-73. The notice issued under s. 274 of the Act was served on Jagdish Lal, one of the partners of the dissolved firm, and the other two partners were not served with notice. During the penalty proceedings initiated under s. 271(1)(c) of the Act, the assessee raised the point that notice should have been served on all the partners of the dissolved firm, but remained unsuccessful. The point has no merit. Sec. 283(2) of the Act specifically provides for serving of notice on any of the partners. Therefore, the service of notice was valid and so were the proceedings and order imposing penalty passed by the IAC. Accordingly, we answer this question against the assessee, that is, in the affirmative.

The relevant facts for the second question are that in the search, the roznamcha was recovered and an almost equal number of sales mentioned therein were not reflected in the account books on the basis of which the return was filed. The assessment year is 1972-73 and the sales shown in the roznamcha are from July 16, 1971, to April 14, 1973, which include the period July 16, 1971, to March 31, 1972, with which we are concerned. On the basis of the roznamcha, 100 per cent. additions were made and on the basis of the additions the ITO had come to the conclusion that the assessee had concealed his income and initiated proceedings for levy of penalty. The additions of 100 per cent. have been confirmed. The Tribunal upheld the penalty and did not agree with the assessee’s contention that since additions were made on estimate basis of suppressed sales, penalty was not leviable. After the amendment in s. 271(1)(c) of the Act and the insertion of the Explanation which are applicable for the assessment year in question, as held by a Full Bench judgment of this Court in Vishwakarma Industries vs. CIT (1982) 28 CTR (KAR) 290 : (1982) 135 ITR 652 (P&H), which has been approved by the highest Court of the land in CIT vs. Mussadilal Ram Bharose (1987) 60 CTR (SC) 34 : (1987) 165 ITR 14 (SC) and Chuharmal vs. CIT (1988) 70 CTR (SC) 88 : (1988) 172 ITR 250(SC), the presumption has to be raised against the assessee that the additions made were the income of the assessee and that he failed to return the correct income because of fraud or gross or wilful neglect and has to be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, for the purposes of cl. (c) of s. 271(1) of theAct. Since the additions are 100 per cent., that is, more than 20 per cent. of the assessed income, these presumptions have to be raised and since the assessee has not given any explanation or produced any evidence to rebut them, the Tribunal was right in holding that penalty was leviable. Accordingly, this question is also answered in favour of the Revenue, in the affirmative.

The references stand disposed of with no order as to costs.

[Citation : 179 ITR 624]