TMI Blog1987 (2) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ana, daughter of one Dr. Mohanlal Peermal of Bombay, for sum of Rs. 3,50,000 with the services of one Diwakar Setty, to whom he paid a sum of Rs. 5,000 as commission; thereby he earned an income of Rs. 95,000 which the assessee did not disclose in his return. Similarly, for the ticket bearing No. Y 934608 which won the second prize of Rs. 25,000 by one Sri Shankaraiah of Seetharampuram, Jangaon Taluk of Warangal District, the assessee paid him a sum of Rs. 21,000 and sold it to one Sri Chunilal L. Vyas for Rs. 28,000 and earned a profit of Rs. 7,000. He did not disclose in his return either the source of Rs. 21,000 or profit of Rs. 7,000 earned thereon. This income of Rs. 1,23,000 was added to his income. This order was ultimately upheld by the Income-tax Appellate Tribunal and the assessment has become final. Thereafter, the Inspecting Assistant Commissioner initiated penalty proceedings under section 271(1)(c) of the Act for concealment of the income thus found. Initially, notice was given to the assessee. On receipt thereof, it is claimed, that Sri S. Ramamohan Rao, chartered accountant, who appeared before the Inspecting Assistant Commissioner on behalf of the assessee, and eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Inspecting Assistant Commissioner of Income-tax levying penalty under section 271(1)(c) of the Income-tax Act, 1961, was violative of the provisions contained in section 274(1) of the Income-tax Act and the Tribunal should have quashed the order as invalid on that ground alone ? (2) Whether, on the facts and in the circumstances of the case, the remand order of the Tribunal dated August 16, 1977, requiring the Inspecting Assistant Commissioner to go into the penalty proceedings afresh is valid in law in view of the provisions contained in section 275 of the Income-tax Act ? " Sri Ratnakar, learned counsel for the assessee, raised threefold contentions in support of the reference. Firstly, he contended that the initial order passed by the Inspecting Assistant Commissioner on July 28, 1976, imposing the penalty is in violation of the principles of natural justice; therefore, it is Per se void. Penalty proceedings are criminal proceedings. Therefore, the Appellate Tribunal ought to have set aside the order and left it open to the Inspecting Assistant Commissioner to take action afresh, if the law so permits. Instead, the Appellate Tribunal remanded the matter, called for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of remand. The word " thereon " was construed and the court upheld the power of remand. In T. M. S. Mohamed Abdul Kader v. CGT [1968] 70 ITR 237, the Madras High Court, while interpreting the words " such orders as it thinks fit ", held that they should not restrict the power of the Appellate Tribunal of an outright remand after setting aside the decision. It also includes the power to make an intermediate direction for the taking of additional evidence or for the giving of a fresh finding on the taking of such evidence by the Appellate Assistant Commissioner in order to enable the Tribunal to dispose of the appeal before it on receipt of a report after the taking of evidence. It is thus clear that the words " as it thinks fit " are of wide amplitude to give direction to authorities below to afford an opportunity to the assessee and the Revenue to adduce evidence afresh, to consider the same and to submit report. Under Order 41, rule 25, Civil Procedure Code, the appellate court when it finds that an issue is essential to the right decision of the suit on merits which was not framed by the trial court, it can frame it and refer back to the trial court to return the evidence to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty shall be imposed unless the assessee has been heard or has been given a reasonable opportunity of being heard. Therefore, when an order under section 271 (1)(c) is passed in violation of section 274(1), it is a statutory violation and thereby an illegality has crept in the order. It is amenable to correction under section 254 of the Act. The order does not, thereby, become void but becomes illegal and so long as it is not corrected in an appropriate proceeding, the order of penalty continues to be a valid order and binds the assessee. He cannot treat it as non est and if he ignores it, he acts at his own peril. In Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505 (SC), at p. 511, Ray J. (as he then was), speaking for the court, has held that : " As assessment proceeding does not cease to be a proceeding under the Act merely by reason of want of notice. It will be a proceeding liable to be challenged and corrected. Similarly, if there is a mistake as to name or there is a misdescription of the name, the proceeding will be liable to be challenged and corrected by giving notice to the assessee subject to such just exceptions as an assessee can take under law. The dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late court itself has power to take additional evidence in a suitable case, yet the discretion would be exercised sparingly but not to fill up the gaps or lacunae in the prosecution evidence. But each case has to be considered in the light of its own facts. Penalty proceedings are not in stricto sensu criminal proceedings. It is in the nature of quasi-criminal proceedings and the object of imposing penalty is to deter the assessee from concealing the income really earned by him or from furnishing false or inaccurate particulars in respect thereof. Chapter XXI of the Act starts with the heading " Penalties imposable Section 271 is, therefore, undoubtedly a penal proceeding, but is quasi-criminal in character. There is a marked distinction between prosecution for an offence punishable under the Act and proceedings to impose penalties under Chapter XXI. The touchstone in a prosecution is the " proof beyond reasonable doubt " and not " preponderance of probabilities ". But the object of the penal proceedings is to stamp out the tendency of an assessee to evade compliance with the provisions of the Act without reasonable cause or the concealment of the income or furnishing inaccurate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irement thereof, the Appellate Tribunal felt it expedient to retain the appeal on its file, to call for a report from the Inspecting Assistant Commissioner, commanding him to record evidence afresh that may be adduced by the assessee and the Revenue so that it itself could consider the evidence to find whether the evidence so adduced enables the Tribunal to draw a conclusion or inference that the assessee has concealed the income of Rs. 1,23,000 before imposing penalty. The act or conduct of an assessee to conceal income is an inferential fact to be drawn or deduced from the totality of facts and circumstances. Evidence may consist of oral, documentary or circumstantial evidence. Adducing of evidence during the proceedings to impose penalty is not, in the strict sense, evidence under the Evidence Act which does not apply to proceedings under the Act. It would apply only if an assessee is prosecuted for an offence under the Act. Any material relevant to the point in controversy is evidence. The Supreme Court in D. M. Manasvi v. CIT [1972] 86 ITR 557, held that the findings given in assessment proceedings would be relevant and admissible material in penalty proceedings. Even the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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