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TMI Blog1972 (9) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... idence before the Tribunal to hold that the assessee had deliberately concealed particulars of his income or deliberately furnished inaccurate particulars of such income as required by section 271(1)(c) of the Act for the assessment years 1959-60 to 1962-63 ?" While answering question No. 1 in the affirmative, the High Court observed that so far as the assessment years 1961-62 was concerned, the penalty proceedings were invalid. The assessee is an individual and the matter relates to the assessment years 1959-60, 1960-61, 1961-62 and 1962-63. During the relevant years the assessee derived income from several sources. The assessment for the first year was made under section 23(3) of the Indian Income-tax Act, 1922. The Income-tax Officer subsequently found that income from the business in the name of M/s. Kohinoor Grain Mills Sales Depot (hereinafter referred to as "the Kohinoor Mills") was not included in the return filed by the assessee and he had not shown any connection with or interest in the said business. For the subsequent three years the assessee disclosed 20 per cent. as his share of the profits from Kohinoor Mills. The Income-tax Officer was of the opinion that Kohino ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there had been concealment of his income on the part of the assessee. The Tribunal, however, gave relief to the assessee in the matter of quantum of penalty. On application made by the assessee, the questions reproduced earlier were referred to the High Court. The High Court, as already mentioned, answered both the questions in the affirmative and in favour of the department. So far as the assessment year 1961-62 was concerned, the penalty proceedings were held to be invalid on a ground with which we are not concerned. Mr. Chagla on behalf of the assessee-appellant has before us assailed the answers to the two questions given by the High Court. It is urged that there was no proper initiation of proceedings for the imposition of penalty. The requisite satisfaction of the Income-tax Officer, according to the learned counsel, has also not been shown to have existed for the initiation of the proceedings. There was also no material or evidence before the Tribunal, it is submitted, to hold that the assessee had deliberately concealed the particulars of his income or had deliberately furnished inaccurate particulars of his income. The above submissions have been controverted by Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(c) of the Act to the assessee "in regard to the concealment of and furnishing inaccurate particulars of income" from Kohinoor Mills. Notices, it would appear, were thereafter issued by the Income-tax Officer to the assessee. The fact that notices were issued subsequent to the making of the assessment orders would not, in our opinion, show that there was no satis faction of the Income-tax Officer during the assessment proceedings that the assessee had concealed the particulars of his income or had furnished incorrect particulars of such income. What is contemplated by clause (1) of section 271 is that the Income-tax Officer or the Appellate Assistant Commissioner should have been satisfied in the course of proceedings under the Act regarding matters mentioned in the clauses of that sub-section. It is not, however, essential that notice to the person proceeded against should have also been issued during the course of the assessment proceedings. Satisfaction in the very nature of things precedes the issue of notice and it would not be correct to equate the satisfaction of the Income-tax Officer or Appellate Assistant Commissioner with the actual issue of notice. The issue of no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther by the Income-tax Officer or by the Appellate Assistant Commissioner. The fact that the Income-tax Officer has to refer the case to the Inspecting Assistant Commissioner if the minimum imposable penalty exceeds the sum of rupees one thousand in a case falling under clause (c) of sub-section (1) of section 271 would not show that the proceedings in such a case cannot be initiated by the Income-tax Officer. The Income-tax Officer in such an event can refer the case to the Inspecting Assistant Commissioner after initiating the proceedings. It would, indeed, be the satisfaction of the Income-tax Officer in the course of the assessment proceedings regarding the concealment of income which would constitute the basis and foundation, of the proceedings for levy of penalty. There is also no force in the submission made on behalf of the appellant that the Income-tax Officer, before feeling satisfied regarding the necessity of initiating proceedings for imposition of penalty and before issuing, the consequential notice should have issued another notice to the assessee and held a preliminary enquiry regarding the necessity of initiating proceedings. Such a course, in our opinion, would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akorlal and Kirit were not partners in this business. Thakorlal was a mere student for a considerable part of the period during which he masqueraded as a partner. The qualifications of both Thakorlal and Ramanbhai to be partners of this business were wholly inadequate to the point of being non-existent. They had no knowledge of the happenings of the business and they had no control whatsoever on the profits which were accumulated in their names. The profits were finally disposed of after Shri D. M. Manasvi became the sole proprietor of the business and even before he became the sole proprietor he had extracted the profits from the business under the guise of loans to be utilised for his own purpose. There is no doubt left in our minds that the business was under the control of Shri D. M. Manasvi. Once the three dummies are out of the way, Shri D. M. Manasvi is the only adult person left in charge of the business and the three minors are only his grand-children. We are, therefore, of the view that not only there was no firm in existence as alleged by the partnership deed but that the business belonged to Shri D. M. Manasvi. The inclusion of the profits of the business in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars." On the basis of the dictum laid down in the above case, it is urged by Mr. Chagla that from the mere fact that the explanation of the assessee in the present case was found to be false it did not follow that the disputed amount represented his income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. In this respect we find that in the present case the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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