TMI Blog1997 (9) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... r Varshney (hereinafter referred to as "the assessee") and was assessed to tax in the status of an individual. On October 18, 1974, the business and residential premises of the assessee and that of Smt. Joya Varshney were subjected to search under section 132 of the Income-tax Act, 1961 (for short "the Act"). It was discovered that the assessee maintained two wives, namely, Smt. Praful Lata Varshney and Smt. Joya Varshney, The first wife was living in an ancestral house with five children whereas the second wife was living in a separate house with her two children. In the income-tax returns, the assessee declared respectively a total income of Rs. 22,790, Rs. 24,095 and Rs. 44,096 for three years under consideration. However, the assessments were completed on the income of Rs. 40,850 for the assessment year 1972-73, Rs. 45,500 for the assessment year 1973-74 and Rs. 63,050 for the assessment year 1974-75. The additions made in each of the three assessment years included an addition under the head income from "undisclosed sources" to cover up the difference for domestic expenses as estimated by the Revenue and that disclosed by the assessee in his account books. It may be observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nominal withdrawals for meeting domestic expenses while he definitely utilised income from undisclosed sources for meeting the total personal expenditure during the year as determined by the Appellate Tribunal. In the instant case, it has been proved by the material gathered against the assessee that he was spending much more on domestic and personal expenses than the expenditure reflected from the account books. The provisions of section 271(1)(c) are, therefore, clearly attracted..." The penalty orders were concurrently upheld, first by the Appellate Assistant Commissioner of Income-tax and thereafter in second appeal by the Income-tax Appellate Tribunal. Learned counsel for the assessee contended that merely because certain additions were made to the returned income on account of low withdrawals for domestic expenses, rejecting the explanation of the assessee, it does not follow that any case for penalty under section 271(1)(c) of the Act was made out unless there was positive material adduced on record by the Revenue on whom the burden lay to show that the additions on account of low withdrawals represented income which was suppressed or the assessee had furnished inaccurat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is the result of quasi-criminal proceedings. The burden is on the Revenue to establish that the disputed amount represents the income of the assessee and that the assessee had concealed it or furnished inaccurate particulars. Further, the burden of proof in penalty proceedings varies from that in assessment proceedings. The taxing authorities in the penalty proceedings must reconsider the matter afresh on the material before them keeping in view that the burden to prove rested on the Revenue, as to whether a particular amount was a revenue receipt. It was pointed out that the findings recorded in the assessment order constitute good evidence in the penalty proceedings but those findings cannot be regarded as conclusive for the purposes of the penalty proceedings. Whether a penalty can be imposed in a given case, the entirety of the circumstances must be taken into account. All will depend on the circumstances of a case. In stating this legal position, the court referred to its earlier decision in CIT v. Anwar Ali [1970] 76 ITR 696 (SC). We have given our anxious consideration to the contentions advanced on behalf of the assessee. We may first consider the contention urged abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs being not a part of the agreed statement drawn up by the Tribunal and submitted to this court. However, at the instance of learned counsel for the assessee, we have gone through the entire statement of Smt. Joya Varshney. It is manifest from it that the statement was not recorded concerning the affairs of the financial year 1974-75. She was questioned about the assets and household articles found at her residence during the search operations. She stated, inter alia : "The obscene literature and (pornograph and blue films reels four in numbers was brought to her by Sri Anil Varshney husband's younger brother) some two years ago (from America). The house No. 98, South Malaka, Allahabad, was purchased by me for rupees twenty-four thousand in the year April, 1969. Some renovation has also been made... I have invested my own money which I had received from my father who died 15 years ago. The refrigerator was purchased by me for Rs. 2,580 some six years ago.... My husband used to give me Rs. 500 per month for household expenditure. The two dunlop mattresses are four to five years old. They were purchased by me.... I have not been doing any business, I am not a partner in any firm. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income which had not been disclosed. The findings to this effect have been returned in categorical terms both by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The case of the assessee throughout was that he was paying Rs. 200---250 per month to his second wife, Smt. Joya Varshney and she was also receiving money from her relations. It had never been the case of the assessee that the domestic expenses per month of Smt. Joya Varshney and her two children were less than Rs. 500 per month or Rs. 6,000 per annum. This is also borne out from the letter of Smt. Joya Varshney stated to have been filed before the Tribunal. On the quantum of expenditure no controversy was raised. What was claimed was that part of such expenditure was met by her parents which was rejected as an afterthought, as observed earlier. About the expenditure for the establishment of the first wife and the source from which it was met, no explanation has been given whatsoever. These facts came to light because of search proceedings. This is clearly stated by the Revenue authorities and the Income-tax Appellate Tribunal in their orders. The assessee was confronted with all these materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that cannot be from books of account rather from the undisclosed sources. Therefore, looking to the totality of the facts and circumstances of the case, we conclude that the assessee showed low expenses and in doing so, it was known to him that he was doing so knowingly, and intentionally to conceal his income and this is amply clear from the totality of the facts and circumstances... we hold that the mens rea is proved by the Revenue without doubt and we feel that no fresh evidence was to be collected by the Revenue to prove it because the mens rea can be proved on the totality of the facts and circumstances of the case.... we hold that the expenses shown by the assessee.... were extremely low and he did so with a mala fide intention to conceal the income..." There is no substance in the contention that penalty under section 271(1)(c) of the Act cannot be imposed in all circumstances whenever the income is assessed on estimate rejecting the explanation of the assessee for low domestic withdrawals or for like reasons. In our opinion, there cannot be any such inflexible rule. There may be cases where additions may be made purely on estimate without reference to any evidence/mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his income and had deliberately furnished inaccurate particulars in order to conceal his income. The domestic expenses estimated by the Income-tax Officer were rather ridiculously on the low side. The Tribunal was right in holding that the assessee was liable to pay penalty. In rendering that decision, the court had referred to the decision in Anwar Ali's case [1970] 76 ITR 696 (SC) and to another decision of the Supreme Court in D. M. Manasvi v. CIT [1972] 86 ITR 557. The ratio decidendi of the case in Vidya Sagar Oswal [1977] 108 ITR 861 (P H), is fully applicable to the facts of the present case. In fact, the Tribunal had also relied upon that decision in reaching its conclusions. So far as the decisions relied upon by the assessee are concerned, they are clearly distinguishable and have no bearing on the facts of the instant case. The Tribunal, in the present case, has recorded a clear and categorical finding of concealment after considering the totality of the circumstances and materials. It is not a case where penalty had been imposed on mere rejection of the explanation. The Revenue has amply discharged its burden in proving that it was a pure and simple case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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