TMI Blog1965 (9) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... his letter dated February 27, 1951, informed the Inspectting Assistant Commissioner of Income-tax, Western Range, Coimbatore, that the assessee derived income from the Vellarmalai Plantations Ltd., Calicut, for the period September 13, 1942, to April 21, 1944. On the basis of this information, the Income-tax Officer issued section 34 notice to the assessee for the years 1944-45 and 1945-46. The assessee returned the same figures. The Income-tax Officer came to the conclusion that the assessee- company did not disclose the income from the Vellarmalai Plantations Ltd., which was determined at ₹ 13,500 and added it to the income originally assessed. Subsequently, action under section 28(1)(c) was taken for concealment of income. The Income-tax Officer was of the opinion that the assessee failed to disclose the income in its return and levied a penalty of ₹ 9,000 for each of the assessment years. The assessee preferred an appeal, but was unsuccessful. The matter was carried further to the Tribunal and the Tribunal also came to the conclusion that the assessee concealed particulars of its income in its return for both the years and thereby brought itself within the mischief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no time did the company draw up the accounts and ascertain the results of the estate; nor were the results taken into the profit and loss account of the company. Even assuming that there were profits in the Vellarmalai Estate, it was neither available to the assessee nor distributed to the shareholders of the assessee-company. Even at the time of the original assessment, the assessee-company sent a letter on December 8, 1944, giving details regarding (1) schedule for other finance; (2) investments; and (3) reconciliation for furniture account appearing in the balance-sheet as at June 30, 1943. In the schedule detailed by the assessee-company under annexure B-2, at the time of the assessment proceedings, it disclosed the following figures to the Income-tax Officer: Vellarmalai lorry upkeep account--Rs. 1,655-3-10 and Vellarmalai capital account-Rs. 41,196-12-0. The Income-tax Officer evidently did not probe into this matter in greater detail in regard to the character of the entry Vellarmalai capital account , though he called upon the assessee to explain various other matters such as investment account, latex case, profit on sale of investments and other miscellaneous income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state anything. Now it is on these facts that we have to consider whether the assessee has concealed the particulars of its income or deliberately furnished inaccurate particulars of such income (section 28(2) of the Income-tax Act). The word conceal implies something more than mere failure to disclose and it pertains to an affirmative action likely to prevent or intended to prevent knowledge of a fact and refers to some advantage to the concealing party or disadvantage to some interested party from whom the fact is withheld. Webster in his Dictionary gives the meaning for the word conceal as to hide, withdraw from observation or to cover to keep from sight. Secrecy is an essential ingredient of the act of concealment. To constitute concealment , it must appear that the statement or act of the person was calculated and designed to prevent discovery of the act with which he is charged. His act must be misleading, false or deceptive. There is an element of mens rea in the matter of furnishing particulars. When interpreting the statutory offence, it is very difficult to produce adequate proof of guilty knowledge; that is the doctrine of mens rea. All that it involves is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iberate intention of suppressing the income from the estate. Nor can it be said that the entry was made with a deceptive intention to mislead the revenue. At the time of the original assessment the assessee placed before the assessing authorities all the available materials in connection with the estate. The Appellate Assistant Commissioner says: Though the appellant was conscious of the receipts being of a revenue nature from the estate and of the fact that the receipts were earned by him, he did not declare that income either in his own return or submit a separate return making his position clear. No man can prove the state of another man's mind. George Spencer Bower in his Law of Actionable Misrepresentation, at page 33, observed as follows: The state of a man's mind, according to Bowen L.J. in Edington v. Fitzmaurice [1885] 29 Ch. D. 459, 483 is as much a fact as the state of his digestion. It is true that it is very difficult to prove what the state of a man's mind at a particular time is, but, if it can be substantiated, it is as much a fact as anything else. A mis-statement of the state of a man's mind is a misrepresentation of fact. Again the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee either at the time of the original proceedings or at the stage of section 28 proceedings was false or that the authorities were not satisfied with the same. As observed in Khemraj Chagganlal v. Commissioner of Income-tax [1960] 38 I.T.R. 523, it is one thing to say that the explanation of the assessee with regard to the source and nature of the amount was not satisfactory; it is another thing to say that the assessee is guilty of wilful suppression of the particulars of his income in the income- tax proceedings. Having perused the orders of the Appellate Tribunal, of the Assistant Commissioner and of the Income-tax Officer in this case, we are satisfied that the assessee has furnished a plausible explanation of the source and nature of the credit entry. At this stage the following passage of Warrington L.J. in In re City Equitable Fire Insurance Co. Ltd. [1925] Ch. 407, 434 may usefully be referred: ...unless he knows that he is committing, and intends to commit, a breach of his duty, or is recklessly careless in the sense of not caring whether his act or omission is or is not a breach of duty. We feel that these observations apply to the instant case, as the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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