TMI Blog1991 (6) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 24,567 and Rs. 21,417, respectively. It came to be known subsequently that the assessee borrowed loans on hundis and that such loans were not real and were bogus in nature. The Income-tax Officer, therefore, reopened the assessments for the assessment years 1962-63 and 1963-64 under section 147(a) of the Income-tax Act, 1961, and the alleged hundi credits of Rs. 1,80,000 and Rs. 75,000, respectively, were brought to tax since the assessee was unable to discharge the onus under section 68 of the Income-tax Act, 1961. Interest on such unproved hundi credits was also disallowed. In the course of reassessment proceedings, the Incometax Officer initiated penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961, and referred the case to the Inspecting Assistant Commissioner under section 274(2). In the meanwhile, the Appellate Assistant Commissioner and the Tribunal confirmed the reassessments in quantum appeals. In the course of penalty proceedings, the Inspecting Assistant Commissioner found that the alleged hundi loans really represented the concealed income of the assessee and, after invoking the Explanation to section 271(1)(c) of the Act, he held that penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation the Explanation to section 271(1)(c), came to the conclusion that penalty is not exigible in the case of the assessee. The Tribunal was correct in following the decision of the Supreme Court in the case of Anwar Ali [1970] 76 ITR 696 and in cancelling the penalties. The assessee produced discharged hundis as prima facie evidence to explain the credits appearing in his accounts. The provisions of section 28(1)(c) of the Indian Income tax Act, 1922, alone would be applicable for the appeals relating to the assessment years 1962-63 and 1963-64. In view of the various decisions rendered under section 28 of the Indian Income-tax Act, 1922, the assessee should be deemed to have discharged the burden of proof placed on him when he produced the discharged hundis. Hundis are negotiable instruments and discharged hundis are sufficient proof of the loans. Though the credits appear in the books relating to the assessment year 1962-63, the loans related to a period 12 years back. The assessee had furnished the particulars of the parties as given in the hundis and it will be too much to call upon the assessee after a lapse of 12 years to produce the parties. During the original assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. The assessee offered an explanation that additions on hundis were not justified as necessary evidence was produced to prove the genuineness of the hundi credits and that, for the later assessment years 1964-65 and 1965-66, the penalties were cancelled by the Tribunal on the ground that tile additions did not represent the concealed income. However, the Inspecting Assistant Commissioner was not convinced by the explanation offered by the assessee and levied a penalty of Rs. 1,86,814 for the assessment year 1962-63 and Rs. 98,608 for the assessment year 1963-64 under section 271(1)(c) of the Act. Learned standing counsel for the Department contended that, in the matter of levying penalty for concealment, the law which stood on the date when the Inspecting Assistant Commissioner was satisfied that there was concealment alone should be made applicable. Thus, according to learned standing counsel for the Department, the penalty for concealment in the present case should be levied under section 271(1)(c) read with the Explanation introduced by the Finance Act, 1964. According to learned counsel for the assessee, the Explanation to section 271(1)(c) would not be applicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation added to section 271(1)(c) was taken into consideration by the Supreme Court in Anwar Ali's case [1970] 76 ITR 696 (SC). Therefore, before the passing of the Finance Act, 1964, and the introduction of the Explanation to section 271(1)(c), the ratio of the decision in Anwar Ali's case [1970] 76 ITR 696 (SC) held the field. Section 271(1) makes appropriate provisions for levying penalties on assessees in different eventualities. One is for non-filing o the returns or delay in filing the returns without reasonable cause. The other is for non-compliance with the statutory notice for production of accounts and documents when summoned for an enquiry. The last one is for concealment of income. Each one of these penalty provisions has two limbs. One limb deals with the condition precedent for initiating penalty action and assumption of jurisdiction of the authority concerned. This limb is separately enacted in each of the clauses (a), (b) and (c) of sub-section (1) of section 271. The other limb of the penalty provision is the substantive provision which deals with the actual imposition of the liability for penalty and the quantification thereof. This limb is found enacted re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication for purposes of completion of penalty proceedings by reference to the date on which the assessment is completed. The crucial date for imposition of penalty is the date of completion of the assessment. Clause (g) constitutes an exception to the general principle but the law to be applied is that in force on the date when the default which attracts penalty is committed. It enacts that, in respect of the assessment years prior to 1962-63, if the assessment is completed on or after April 1, 1962, penalty may be levied under the provisions of the 1961 Act. This clause which is constitutional and does not violate the fundamental rights attracts section 271 and the other penalty provisions of the present Act, even if the default was committed and detected in the course of proceedings under the 1922 Act. In a case covered by this clause, the quantum of penalty should be determined with reference to the provisions of section 271 of the Act and not section 28 of the 1922 Act. Since the satisfaction of the Income-tax Officer is the condition precedent for the exercise of power under section 271, i.e., satisfaction that there was concealment or furnishing of inaccurate particulars un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of clause (iii) of section 271(1) was also in order." This decision was rendered after taking into consideration the following decisions, viz., Chuharmal v. CIT [1988] 172 ITR 250 (SC) ; CIT v. Anwar Ali [1970] 76 ITR 696 (SC) ; CIT v. Bihar Cotton Mills Ltd. [1988] 170 ITR 290 (Patna) ; CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 (SC) ; Jain Brothers v. Union o India [1970] 77 ITR 107 (SC) ; Kuppuswamy Chetty (R.) v. CIT [1982] 135 ITR 235 (Mad) [FB] ; Maya Rani Punj v. CIT [1986] 157 ITR 330 (SC) and Vishwakarma Industries v. CIT [1982] 135 ITR 652 (P H) [FB]. Reliance was placed by the Department on the decision rendered by the Supreme Court in the case of Maya Rani Punj v. CIT [1986] 157 ITR 330. According to the facts in that case, for the assessment year 1961-62, the assessee's return of income had to be filed by September 28, 1961, but neither was the return filed by that date nor was any extension of time asked for. The return was filed after a delay of seven months on May 3, 1962, i.e., after the Income-tax Act, 1961, had come into force. The Income-tax Officer initiated proceedings under section 271(1)(a) of the Act of 1961, and holding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... den placed upon the assessee by the Explanation has been discharged by him, then the onus shifts to the Department to show that the amount in question constituted his income and not otherwise. If the assessee has tendered proof or the explanation given by him is not satisfactory or convincing merely on the possibility of its being unlikely, the conclusion that concealment was established has been held to be not warranted. In the present case, sums of Rs. 2,43,060 for the assessment year 1962-63 and Rs. 1,26,510 for the assessment year 1963-64 were brought to tax under the head "Other sources" only on the ground that the assessee has not explained the genuineness of the transactions evidenced by the credit entries standing in the names of various multani bankers in his books. The said amounts represented the increase in the peak credits during the assessment years under consideration. The assessee produced the discharged hundis in proof of the transactions and the assessee was unable to produce the bankers. The hundi papers are negotiable instruments containing the names and addresses of the creditors. The assessee also produced his account books where the credits are entered. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hdas or from Gowri Shankar Bagdy. The assessee has been able to point out a source for this sum of Rs. 15,000 and this cannot be refuted by a mere steady disability on the part of the Department or the Tribunal. After the lapse of ten years, the assessee should not be placed upon the rack and called upon to explain not merely the origin and source of his capital contribution but the origin of origin and the source of source as well." In this context, it is significant to note that, while considering the advisory jurisdiction of the High Court over the reference tinder the Income-tax Act pertaining to penalty matters, the Supreme Court in the case of Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 held as under (headnote) : "The appellant had only accepted certain amounts as taxable ; it had not been accepted by the appellant that it had deliberately furnished inaccurate particulars or concealed any income. This was not a case where there was no evidence to support the Tribunal's conclusion. Nor had the Tribunal acted on material which was irrelevant to the enquiry or considered material partly relevant and partly irrelevant or based its decision partly on co ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
