TMI Blog1981 (3) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had filed the return on 10th September, 1964, disclosing the total income of Rs. 25,594. The ITO noticed certain hundi loans amounting to Rs. 1,25,000. He treated these loans as not being genuine and added the same as the assessee's income from "other sources ". He also noticed a credit of Rs. 1,88,800 which the assessee claimed as winnings from horse races. The ITO held that no evidence had been produced to prove the winnings of this amount from horse races. Accordingly, he added this sum of Rs. 1,88,800 as the assessee's income from "other sources". In appeal, the AAC held that the sum of Rs. 1,25,000 represented the hundi loans on the ground that the peak credit in this year did not exceed the amount of Rs. 1,55,000 which was the closing balance of the earlier year. He, however, sustained the addition of Rs. 1,88,800. The Tribunal, however, sustained the order of the AAC with regard to the addition of Rs. 1,88,800. The ITO, as mentioned hereinbefore, had initiated the penalty proceedings and referred the matter to the IAC The IAC issued a notice to the assessee under s. 274(2) read with s. 271(1)(c) and after giving the opportunity of a hearing to the assessee imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to be made under this head for this year. As the appeal against this addition is still pending this contention of the assessee cannot be entertained by me, at this stage. On the assessee's own admission the credits under consideration represent the concealed income of the assessee. Hence, the claim for deduction of interest on such credits amounting to Rs. 6,594 also represents a deliberately false claim for deduction of a non-genuine item of expenditure. In respect of this addition also the provisions of section 271(1)(c) are attracted. 5. The minimum penalty leviable for the default is Rs. 55,599 and the maximum is Rs. 4,16,994. I hereby levy penalty of Rs. 56,000 equal to about the minimum penalty leviable which I feel will be reasonable under section 271(1)(c) read with section 274(2) of the Act. The ITO to issue D.N. and challan accordingly." There was thereafter an appeal before the Appellate Tribunal. The Appellate Tribunal after referring to the facts stated hereinbefore and several other decisions observed in the original order passed by it on the 7th June, 1974, inter alia, as follows: In view of the ratio laid down in the above cases, we are of the view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a miscellaneous application was made and by an order dated 31st May, 1975, in para. 5, at p. 5, of the order of the Tribunal the following sentences were deleted: " The Inspecting Assistant Commissioner also referred to the income from house property and income from letting out of furniture on wife's account, which the assessee has not returned. The AAC has sustained Rs. 1,767 and Rs. 624, respectively, in this regard and the assessee has concealed these two items by not returning the same. There was no appeal to the Tribunal with regard to these items. " Therefore, it appears from the facts stated hereinbefore that while the ITO had initiated the penalty proceedings for concealment of the income, for furnishing inaccurate particulars of different item, etc., by the assessee as indicated in his order, the IAC in imposing the penalty, had considered only two items, viz., the sum of Rs. 1,25,000, representing the hundi loans, as well as Rs. 6,594, which was said to be the wife's income, not correctly shown in the husband's return. The assessee being aggrieved by the said order went up in appeal before the Tribunal. The Tribunal did not consider Rs. 1,25,000 because the same had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors and the interest was wrongly allowed. It was challenged before the High Court. The ITO in his affidavit declined to disclose the facts. Thereafter, he filed further affidavit stating that in the course of the assessment of the assessee for the assessment year 1963-64, it was discovered that various items shown as interest loan against the hundis in the assessee's books of account for the assessment year 1959-60, were, in fact, fictitious and credits against the names of certain persons were found not to be genuine and in that premises it appeared to the ITO that the assessee had failed to disclose fully and truly all the particulars of the income. The notice was quashed because it was held by the Supreme Court that the respondent had produced all the hundis on the strength of which it had obtained loans from the creditors as also the entries in the books of account showed the payment of interest and the Supreme Court was of the view (at p. 5 of the report), that it was for the ITO to investigate and determine whether these documents were genuine or not. The Supreme Court felt that the assessee could not be said to have failed to make a true and full disclosure of the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject-matter of the appeal is primarily the power of the Appellate Tribunal as circumscribed by the provision of the statute. Under s. 254(1) of the I.T. Act, 1961, the Tribunal is empowered and authorised to pass " such order ", as it considers fit and proper on the subject-matter of the appeal, in view of the expression " thereon " which makes it quite clear. Incidentally, we may mention that under s. 26 of the Indian I.T. Act, 1922, the Income-tax Appellate Tribunal I had also original jurisdiction to impose penalty on its own. That power the Income-tax Appellate Tribunal no longer enjoyed under the Act of 1961. Therefore, we are only confined to the position whether the imposition of the penalty proceedings as found by the IAC was the subject-matter of the appeal. Now, this question was considered by the Division Bench of this court in the case of CIT v. Calcutta Discount Company Ltd. [1971] 82 ITR 941, where this court had held, dealing with s. 33(4) of the Indian I.T. Act, 1922, which used similar expression, that the power of the Tribunal was restricted to the subject-matter of the appeal, and the subject-matter of the appeal consisted of the memorandum or grounds of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal remained the same, and the Tribunal having held that the expenditure incurred fell within the terms of s. 10(2)(v), though not under s. 10(2)(vib), it had jurisdiction to admit that expenditure as a permissible allowance in the computation of the taxable income of the assessee. Here, however, whether the other item was properly exigible in penalty proceeding of this nature, the IAC had no occasion to advert to. That being so, in our view, it is not a question of allowing deduction on the one ground or the other, but it is a question of allowing or permitting the attraction of s. 271 (1)(c) read with the Explanation on a ground which was not adverted to by the IAC, from whose order the appeal was preferred before the Tribunal. On the subject-matter of the appeal, as I had mentioned in the decision in the case of R..L. Rajgharia v. ITO [1977] 107 ITR 347 (Cal), referred to hereinbefore, I had observed in the manner as have indicated before. This view has been confirmed by the Division Bench of this court in the decision in the case of ITO v. R. L. Rajghoria [1979] 119 ITR 872. In this connection, reference may also be made to the observations of the Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: "In the above view of the matter it must be held that the penalties which have been provided by section 28(1) are meant for the acts of omission or commission which are set out therein and once an assessee is proved to have been guilty of them the penal provisions are attracted and with reference to clause (c) irrespective of the amount concealed. Thus the answer returned by the High Court to the question referred was correct." This observation, in our opinion, cannot have any relevance to the controversy before us. It dealt with the question whether penalty was imposable at all. In the instant reference before us, we are not concerned with this controversy. Our attention was also drawn to the decision of the Allahabad High Court in the case of CIT v. Zeekoo Shoe Factory [1981] 127 ITR 837. This again is entirely on a different set of facts and the power of the Appellate Tribunal to go into another ground upon which penalty was sustained was not canvassed before the Division Bench of the Allahabad High Court. For the reasons mentioned hereinabove, we will answer question No. 1 in the negative and in favour of the assessee. For the reasons mentioned hereinabov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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