TMI Blog2006 (10) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... cold drink business in the name of Smt. Vijai Laxmi Chaurasia?" Assessment years 1974-75 to 1976-77 : "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in sustaining the penalty on the basis of findings arrived by it in the quantum appeal ? 2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in sustaining the penalty under section 271(1)(c) of the Income-tax Act, 1961 in relation to the income of Rs.10,500 from cold drink business in the name of Smt. Vijai Laxmi Chaurasia ?" 2. Briefly stated, the facts giving rise to the present reference are as follow : 3. The assessee's father late Shri Sripal Chaurasia during his life time was running a beetle shop and had also been selling cigarettes and cold drinks. Since the accounting period corresponding to the assessment year 1970-71 upto the assessment year 1972-73, the applicant was assessed at Rs.5,000 for 1970-71, Rs.6,000 for 1971-72 and Rs.7,500 for 1972-73. No books of account were maintained by the assessee. In February, 1972, he was married to one Smt. Vijay Laxmi. He filed his returns of income for the assessment years 1971-72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey represented funds left by his late father but of which he had no evidence and so the same were offered for assessment. The Income-tax Officer examined the various claims of the assessee and found that the contention about the business carried by his wife since 1973-74 was not worthy of credence. The Tribunal after examining the material on record, found that the assessee's contention that the business of cold drinks was done by the assessee's wife from the assessment year 1973-74 was not worthy of credence. 7. In paragraph 19 of its order, the Tribunal observed as under : "19. After carefully examining the facts on record and the orders of the authorities below and apprising the rival submissions, we feel that so far as the finding of the learned Appellate Assistant Commissioner that the business of cold drinks in fact belongs to the assessee is concerned, it is in our opinion correct. Shri Raj Kumar Chaurasia has admittedly been doing the cold drinks business which is now being claimed as belonging to his wife for the assessment years 1970-71 to 1972-73. The story that soon after his marriage with Smt. Vijai Laxmi, she of her own decided to start cold drinks business an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalties on the assessee for concealment of income in the setting of the aforesaid findings of the Tribunal. On first appeal against the aforesaid orders of the Income-tax Officer the First Appellate Authority, the penalties in question were deleted by the learned Appellate Assistant Commissioner for assessment year 1973-74 and by the learned Commissioner of Income Tax (Appeals) for the later years. While deleting the penalty the Appellate Assistant Commissioner omitted to take note of the order of the Tribunal in quantum appeals though he passed the impugned order subsequently. He referred to the order of the Commissioner of Income Tax (Appeals) and on that basis deleted the addition by observing, inter alia, as below:- "So far as the investment in cold drink business and the income therefrom is concerned I find that both the issues are inter-related. In assessment years 1974-75 to 1976-77, the Income-tax Officer. had imposed penalty of concealment with reference to the income from cold drink business being run in the benami name of the appellant's wife, but the same was deleted by the Commissioner of Income Tax (Appeals) vide his order dated February 10, 1982 observing that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. 12. In paragraph 23 of the Tribunal's order the following finding has been recorded : "23. The first appellate authorities have unfortunately closed their eyes towards the aforesaid eloquent finding of the Tribunal and have merely brushed aside the aforesaid analysis by observing that the matter was debatable. Where is the debate after the evidence has been appraised as above by the final fact finding authority ? With the above appraisal, we still concur in penalty proceedings. For there is nothing by way of penalty proceedings. For there is nothing by way of additional evidence so far as the reappraisal of the same evidence in penalty proceedings is concerned, we again see no justification to record a contrary finding. This being so, we are unable to accept the finding given by the first appellate authorities that the assessee has not concealed income of cold drink business, which was attempted to be passed off in the name of his wife. In fact, we find the facts of the present case more or less akin to the facts of the case in D. M. Manasvi v. CIT [1972] 86 ITR 557. There too a business was being done in somebody else's name and the issue was contested all along, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal has held that the cold drink business which was alleged to be carried in the name of the applicant's wife, Smt. Vijai Laxmi, belonged to the applicant and consequently the income of cold drink business carried on in her name was added to the applicant's income. The applicant had not brought any fresh material on record to show that the conclusion arrived at by the Tribunal in the quantum appeal was factually incorrect nor any doubt has been created on the said finding. He, thus, submitted that the Tribunal was justified in sustaining the penalty. He further submitted that in respect of the addition upheld by the Tribunal in the quantum appeal, the applicant had not furnished any other explanation except what was offered by him in the course of assessment/quantum proceeding and, therefore, the finding recorded by the authorities in the assessment/quantum proceeding can be relied upon while levying penalty. He further submitted that the finding of the Commissioner of Income Tax that the difference between the assessed income and returned income did not arise due to fraud or gross or wilful neglect on the part of the assessee, stood set aside when the Tribunal had held that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the receipt of the amount in dispute constitutes income of the assessee. Apart from the falsity of the explanation given by the assessee, the department must have before it, before levying penalty, cogent material or evidence from which it could be inferred that the assessee has consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the same and that the disputed amount is a revenue receipt. No doubt the original assessment proceedings, for computing the tax may be a good item of evidence in the penalty proceedings but the penalty cannot be levied solely on the basis of the reasons given in the original order of assessment. The aforesaid case related to the assessment year 1955-56. It may be mentioned here that the provisions relating to imposition of penalty under section 271(1)(c) of the Act has undergone a sea change after the decision of the Apex Court in the case of Anwar Ali [1970] 76 ITR 696 and Explanations have been added whereunder the onus to prove that the difference between the assessed income and the returned income has not been concealed, has been placed upon the assessee in certain circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2] 83 ITR 369." 20. It may be mentioned here that by section 40 of the Finance Act, 1964 the word ''deliberately" occurring in clause (c) of section 271(1) of the Act has been omitted and the following Explanation was inserted at the end of the sub-section (1) __ [1964] 54 ITR (St.) 5, 20 : "Explanation.-- Where the total income returned by any person is less than eighty per cent of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147(reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section." 21. Prior to the aforesaid amendment made by the Finance Act, 1964 the Apex Court in the cases of Anwar Ali [1970] 76 ITR 696 and Khoday Eswarsa and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Anwar Ali, [1970] 76 ITR 696, Khoday Eswarsa and Sons [1972] 83 ITR 369 and Anantharam Veerasinghaiah and Co. [1980] 123 ITR 457 has held that after the amendment made in section 271(1)(c) of the Act by the Act No.5 of 1964 wherein the word "deliberately" was omitted and an explanation was inserted at the end of sub-section (1) and two radical changes were brought about. This Court has held as follows :- "With the omission of the word 'deliberately', it was no longer necessary to establish that the act of concealment or furnishing of inaccurate particulars of such income was deliberate on the part of the assessee. The effect of the newly added Explanation is that for the purposes of levying penalty, two clear-cut divisions have been made, based on variation between the assessed income and returned income. The dividing line is the objective test whether the returned income is less than 80 per cent. of the assessed income or not, reduced by the expenditure incurred bona fide for the purposes of making or earning any income included in the total income, but which had been disallowed as a deduction. Cases where the returned income is more than 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m [1965] 56 ITR 172 this Court has held that a finding arrived at in assessment proceedings that a certain income was not disclosed in the return and that it was therefore undisclosed income is material sufficient to support a finding to be reached in penalty proceedings that income had been concealed, though such material is not conclusive and can be rebutted. 26. In the case of D.M. Manasvi [1972] 86 ITR 557, the Apex Court has held that the plea that there was no relevant material and evidence before the Tribunal to hold that the assessee had deliberately concealed the particular of his income or deliberately furnished inaccurate particular of such income is equally bereft of force where the Tribunal has relied upon findings recorded in the order in appeal refusing registration to the firm. 27. In the case of P.M.A.P. Ayyamperumal Nadar [1974] 97 ITR 161 the Madras High Court after referring to the decision of the Apex Court in the case of Anwar Ali [1970] 76 ITR 696 and Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC), has held as follows (page 167) : "We are not able to construe the said decisions as lying down that there should be fresh materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment and if those materials reasonably point to the conclusion that the disputed amount represented income and that the assessee had deliberately concealed particulars of the same, the levy of penalty can be justified." 30. It was a case relating to the assessment year 1961-62 when the Explanation was not on the statute book. 31. In the case of New Bijli Foundry [1982] 135 ITR 593 the Punjab Haryana High Court has held that the findings recorded in the assessment proceedings are certainly relevant in the penalty proceedings. 32. In the case of Mussadilal Ram Bharose [1987] 135 ITR 14 the Apex Court has held as follows (page 20) : "Under the law as it stood prior to the amendment of 1964, the onus was on the Revenue to prove that the assessee had furnished inaccurate particulars or had concealed the income. Difficulties were found in proving the positive element required for concealment under the law prior to the amendment and this had to be established by the Revenue. To obviate that difficulty, the Explanation was added. The effect of the Explanation was that where the total income returned by any person was less than 80 per cent. of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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