TMI Blog1972 (9) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... f the department : "(1) Whether, on the facts and in the circumstances of the case, the proceedings for the imposition of penalty were properly commenced in the course of any proceedings under the Act as required by section 271 of the Income-tax Act, 1961, for the assessment years 1959-60 to 1962-63 ? (2) Whether, on the facts and in the circumstances of the case, there was any material or evidence 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 busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment order for the issue of a notice under section 271(1)(c), the penalty proceedings could be said to have commenced during the course of the assessment proceedings and, therefore, levy of penalty was not invalid. The Tribunal also rejected the submission made on behalf of the assessee that there was no evidence to show that the assessee was the owner of the business of Kohinoor Mills and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears in question, held that Kohinoor Mills had been wrongly shown to be a partnership firm and that the other alleged partners were simply name-lenders for the assessee. It was further held that Kohinoor Mills was the proprietary concern of the assessee and the income from that concern should be considered to be the income of the assessee. Notice was ordered to be issued for proposed penalty under section 271(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 claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are also not impressed by the argument advanced on behalf of the appellant that the proceedings for the imposition of penalty were initiated not by the Income-tax Officer but by the Inspecting Assistant Commissioner when the matter had been referred to him under section 274(2) of the Act. The proceedings for the imposition of penalty in terms of sub-section (1) of section 271 have necessarily to be initiated either 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to its earlier observations in the appeal relating to the refusal of the income-tax authorities to register Kohinoor Mills as a firm. Those observations were as under : "In our view, the income-tax authorities were fully justified in refusing to grant registration to the firm for all the three years. On going through the statements of Ramanbhai Thakorlal and Gopaldas, we have no doubt at all that Ramanbbai, Thakorlal 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Income-tax Act, 1922, are penal in character. The gist of the offence under section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden is on the department to establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation given 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
