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TMI Blog1971 (9) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ties came to Rs. 57,082 during the previous year. The assessee explained that part of its records for the relevant year had been washed away by floods and that the accounts were reconstructed from the material available to it. It admitted that the trial balance could not be reconciled. The Income-tax Officer added the amount of Rs. 57,082 to the total income disclosed by the assessee, and that addition was maintained by the Appellate Assistant Commissioner and thereafter by the Income-tax Appellate Tribunal. The Income-tax Officer, being of opinion that the assessee had concealed the particulars of its income and had furnished inaccurate particulars of such income during the course of assessment proceedings, decided upon action for the levy of penalty. Finding that the minimum penalty imposable exceeded Rs. 1,000 he referred the proceeding for imposition of penalty to the Inspecting Assistant Commissioner under section 274(2) of the Income-tax Act, 1961. The Inspecting Assistant Commissioner, after allowing the assessee an opportunity of being heard, imposed a penalty of Rs. 20,000. The assessee appealed to the Income-tax Appellate Tribunal. The Tribunal held that as the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve it was possible that some of the undisclosed income related to earlier years. The plea was rejected for want of evidence. The Tribunal observed that the excess of assets over liabilities was apparent from the record, and in case the assessee claimed that the amounts received by it did not represent its income it should have disclosed those amounts in Part F of the return. The Tribunal held that the assessee had failed to disclose the excess of Rs. 57,082 in its income and, therefore, penalty was attracted. It is settled law that in the matter of imposing penalty the burden lies on the income-tax department to establish that the assessee has consciously concealed the particulars of his income or has deliberately furnished inaccurate particulars. In Commissioner of Income-tax v. Anwar Ali, the Supreme Court said: " Another point is whether a finding given in the assessment proceedings that a particular receipt is income after rejecting the explanation given by the assessee as false would, prima facie, be sufficient for establishing, in proceedings under section 28, that the disputed amount was the assessee's income. It must be remembered that the proceedings under section 28 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the assessee had to reconstruct its accounts there must be something more than mere inaccuracies in the accounts to justify the finding that there was a conscious concealment of income or a deliberate furnishing of inaccurate particulars. It may be a case for enhancing the total income returned by the assessee, but we are not satisfied that there is any material on the record to prove that the assessee consciously concealed the particulars of its income or deliberately furnished inaccurate particulars. In this view of the matter, the penalty imposed cannot be sustained. On the other point, that is whether the procedure adopted in levying the penalty was in accordance with law, the assessee contends before us that, besides the Income-tax Officer, the Inspecting Assistant Commissioner should also have been satisfied in the course of the assessment proceedings that the case fell within section 271(1)(c). The contention is without substance. In a case such as the present, what the statute contemplates appears to be this. The Income-tax Officer, in the course of an assessment proceeding before him, should first be satisfied that the assessee has concealed the particulars of his incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferment of power is contained in that part. Before reaching the stage when the second part comes into play, the Income-tax Officer decides whether the case is one in which he has jurisdiction to exercise the power contained in that part or it is one over which the Inspecting Assistant Commissioner has jurisdiction. When section 274(2) declares that the Inspecting Assistant Commissioner shall, for the purpose of imposing a penalty, " have all the powers conferred under this Chapter for the imposition of penalty it refers to the powers contained in the second part of section 271(1). There is no doubt that before actually imposing any penalty in the exercise of those powers the Inspecting Assistant Commissioner must come to the conclusion that the case is one which attracts clauses (a), (b) or (c) of section 271(1). He may reach that conclusion after hearing the assessee or giving him a reasonable opportunity of being heard. It is only then that he can make the penalty order. But nothing in section 274(2) requires that what he does must be done upon his being satisfied in that behalf during the course of the assessment proceeding. As we have pointed out the provision relating to satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs are being held by the Income-tax Officer or the Appellate Assistant Commissioner who are the persons likely at all to know whether there has been a concealment and not the Inspecting Assistant Commissioner who, not dealing with the regular assessment proceedings, would have little or no knowledge of concealment. It is significant to emphasise also that section 271 of the Income-tax Act does not breathe a word about the Inspecting Assistant Commissioner. " The learned judge also explained the expression " for the purpose of " in section 274(2) to mean " for the purpose of imposing the penalty and not for commencing the penalty proceedings but for concluding it ". Reference may also be made to Padgilwar Brothers v. Commissioner of Income-tax, where the Bombay High Court held that the power to impose penalty depends upon the satisfaction of the Income-tax Officer in the course of proceedings under the Act. It was also held that the Inspecting Assistant Commissioner did not lack the power to continue with the penalty proceeding upon the case being referred to him by the Income-tax Officer merely because the assessment proceeding had already been completed by the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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