TMI Blog1984 (7) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 5,000 advanced to one Shri Miraz Ali Khan on August 10, 1967, was also not entered in the assessee's books of account. The ITO further found that a sum of Rs. 1,000 received from Smt. Jamalunnisa Begum by way of commission was also not accounted in the books. Thus, the ITO found that money-lending loans to the extent of Rs. 8,200 were not entered in the assessee's accounts apart from a sum of Rs. 1,000 received by way of commission from Smt. Jamalunnisa Begum. The ITO included the sum of Rs. 9,200 in the assessee, s total income for the assessment year 1968-69. The assessee carried the matter in appeal, but the assessment was confirmed and the matter became final. Before the completion of the assessment proceedings, the ITO initiated proceedings for the levy of penalty for concealment of income or for furnishing inaccurate particulars of such income under s. 271(1)(c) of the I.T. Act, 1961. The assessee explained that the money-lending advances of Rs. 8,200 referred to above were made from out of the assessee's winnings in card games. It does not appear that any specific explanation was offered in respect of the sum of Rs. 1,000 received from Smt. Jamalunnisa Begum by way o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urthy, contended that the penalty proceedings in the present case could not be considered to be invalid by reason of the fact that the ITO failed to strike out the inappropriate portions. According to the learned counsel, penalty was levied in the present case not only for concealment of income but also for furnishing inaccurate particulars of such income. The learned counsel contended that the explanation that the money-lending advances were made from out of the winnings from card games amounted to furnishing of inaccurate particulars of the assessee's income and, consequently, there is no necessity to strike out any portion of the notice issued under s. 274 by the ITO. The learned standing counsel, therefore, urged that the Tribunal erred in cancelling the penalty proceedings as invalid. The learned counsel for the assessee, Sri Jagannatha Raju, supported the order of the Tribunal cancelling the order of penalty and placed reliance on the judgment of the Kerala High Court referred to above. We are unable to subscribe to the view that by reason of the ITO not striking out inappropriate portions of the notice issued under s. 274, the notice issued was rendered invalid. In the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be levied. This apart, we also agree with the learned counsel for the Revenue that the provisions of s. 274 would apply not only to concealment of income but also for furnishing inaccurate particulars of such income and where the offence is two-fold, there is no need on the part of the ITO to strike off any inappropriate portions. In the present case, the offence alleged against the assessee is that there is concealment of income and furnishing of inaccurate particulars of such income. It is not, therefore, necessary for the ITO to strike out any portion of the notice issued to him. The principle of natural justice contained in s. 274 which requires that an assessee shall be heard before levying penalty under s. 271 is to ensure that the basic requirement of fair play in action is fulfilled. The rules of natural justice are flexible and cannot be put on any rigid formula. In order to sustain a complaint of violation of principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice has been caused to the party concerned by the procedure followed. We have already mentioned above that the assessee has not shown that any such prejudice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal's order that the assessee took an objection to the Department being allowed to invoke the Explanation to s. 271(1)(c) for the first time before the Tribunal. The Tribunal referred to the judgment of the Orissa High Court in CIT v. Behara [1976] 105 ITR 193, and held that it was open to the Revenue to require the Tribunal to consider the question of applying the Explanation to s. 271(1)(c) for the first time. After referring to the Orissa High Court's judgment, the Tribunal came to the conclusion in the following terms : "In the light of this judgment in [1976] 105 ITR 193, 1 have no hesitation to apply the Explanation to the facts of the present case and hold that, if so applied, penalty is clearly exigible. " Apart from this abrupt conclusion, the order does not disclose that the Tribunal had occasion to consider whether the Explanation to s. 271(1)(c) is applicable at all. Reference may be made to the decision of this court in Addl. CIT v. Burugupalli China Krishmamurthy [1980] 121 ITR 326 (AP). The assessee explained that the money-lending advances were made from out of his winnings from card games. According to the assessee, the winnings from card games were not inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as the limitation is concerned, we find that the assessment order was made on March 30, 1972, and the order of penalty was passed on March 30, 1974. The order was thus passed within two years from the date of the assessment order as per the provisions of law prior to the Taxation Laws (Amendment) Act, 1970, which came into effect from April 1, 1971. It is not necessary to consider the effect of the amended provisions because even under the unamended provisions, it is clear that the penalty was levied before the expiry of two years from the date of the assessment order. As regards the second contention regarding the deemed income, s. 69 enumerates the circumstances in which an amount can be deemed to be the assessee's income. Once the amount is deemed as income, all the necessary consequences by treating the said amount as income for purposes of law would necessarily follow. We find it difficult to accept the learned counsel's contention that the sanction to levy penalty under s. 271(1)(c) in respect of concealment of income or in respect of furnishing inaccurate particulars of such income, does not take in its sweep income deemed to be so under any of the provisions of the Act. W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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