TMI Blog2008 (8) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... "1. Whether on the facts and in the circumstances of the case, penalty is leviable under section 271(1)(c) of the Income Tax Act, 1961? 2. Whether on the facts and in the circumstances of the case the Tribunal has rightly rejected the contention of the assessee in law that after lapse of 17 years as the assessee could not produce the depositor and accordingly no penalty should have been levied? 3. Whether on the facts and circumstances of the case when the income assessed under section 68 of the Act, penalty under section 271(1)(c) can be levied in law?" 4. Whether on the facts and in the circumstances of the case, the Tribunal was right in confirming the penalty by relying upon the alleged statement made by the depositor in some other proceedings before some other officers? Assessment Years 1967-68 only: Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that Explanation to Section 271(1)(c) of the Act was applicable to the assessment year 1967-68?" 2. The facts giving rise to the assessment order for assessment year 1966-67 are as under: (i) For the Assessment year 1966-67 the assessee had on 25.7.1970 filed a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vanced any loan to the assessee. The Assessing Officer thereafter by his order passed in the year 1982 computed the total income of the assessee by adding Rs.50,000/- as income from undisclosed sources to the "Nil" income shown by the assessee. (iv) The assessee thereafter challenged the above quantum order passed in 1982 upto the Income Tax Appellate Tribunal but was unsuccessful. (v) Thereafter in mid June 1985 the Assessing Officer initiated penalty proceedings against the assessee under section 271(1)(c) of the Income-tax Act. During the penalty proceedings before the Assessing Officer, the assessee explained that the loan could not be substantiated because of the very long lapse of time. The explanation did not find favour with the Assessing Officer and he invoked the provisions of the Explanation to section 271(1)(c) as it stood between 1 st April, 1964 and 31 st March, 1976 and levied penalty of Rs.50,000/- against the assessee for the assessment year 1966-67. (vi) The assessee challenged the order of the Assessing Officer before Commissioner of Income-tax (Appeals) who, inter alia, held that the assessment was set aside on 4 th September, 1972 and reassessment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stal authorities with the remarks "left place". As far as the third party is concerned, he informed the Assessing Officer that he is 72 years old and that he had preserved the books of account beginning from the Assessment Year 1971-72 onwards and all his previous records were destroyed by him because he never thought that there will be any necessity of production of the same at any time. He, therefore, pleaded his helplessness in complying with the requirement of the summons. However, he stated that he did remember to have had loan transactions with the assessee. (ii) Thereafter the Assessing Officer asked the assessee to produce the three parties before him, but the assessee expressed its helplessness on the same grounds that were stated by the assessee for the Assessment Year 1966-67. The Assessing Officer, therefore, rejected the contention of the assessee and added a sum of Rs.1,25,000/- as income from undisclosed sources to the assessees' negative/loss income of Rs.4,64,301/- and thereafter computed its total income as negative/loss income of Rs.3,39,301/- This order was challenged by the Assessee upto the Appellate Tribunal and the only relief that the assessee could get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty of Rs.10,590/- under amended section 271(1)(c) of the said Act. On an appeal preferred by the Assessee to the Income Tax Appellate Tribunal, the Tribunal allowed the same taking a view that the assessee had not admitted concealment of income and that merely because the amount of Rs.10,590/- was surrendered for taxation by the assessee, this did not ipso facto raise an inference that the assessee admitted that it was his concealed income. From the aforesaid decision of the Tribunal the following question was referred to the Court:- "Whether, on the facts and in the circumstances of the case, the Tribunal has erred in law in holding that the penalty levied on the assessee under section 271(1)(c) of the Act for the assessment year 1968-69 was not sustainable?" 4. The learned Advocate appearing for the revenue while impugning the order of the Appellate Tribunal submitted before the Court that the assessee had in fact admitted concealment of income and hence it was not necessary for the revenue to prove the same. It was submitted by him that in view of this the burden was on the assessee to show that there was no concealment and the conclusion arrived at by the Tribunal wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st imposition of the said penalty which appeal was allowed by the Tribunal holding that no penalty would be imposed upon the assessee when it had returned a loss and it had been assessed finally on a loss figure. Thereafter the Commissioner of Income Tax (Central), Ludhiana moved an application before the Income Tax Appellate Tribunal, Amritsar which referred the following two questions to the Punjab and Haryana High Court. (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding: (a) that the provisions of the Explanation to section 271(1)(c) will not be attracted to the present case? (b) that the word "income" occurring in clauses (c) and (iii) of section 271(1) refers to a positive income only and not to a loss? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in cancelling the penalty order passed by the Inspecting Assistant Commissioner by holding that no penalty could be levied against the assessee?" 6. The Punjab and Haryana High Court answered all the questions set out hereinabove in the negative i.e. in favour of the assessee and against the revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eported in Mohd. Atiq v. Income Tax Officer [1962] 46 ITR 452 (All)); P. Krishna Bhatta v. Income Tax Officer [1981] 132 ITR 21 (Ker); and K. P. Narayanappa Setty and Co. v. Commissioner of Income Tax [1975] 100 ITR 17 (AP) wherein it is held that though no time limit may have been prescribed by Income-tax Act imposing penalty, the penalty should be imposed within a reasonable time and that penalty levied after the delay of 14/16 years without any valid reason/explanation is invalid. Mr. Mehta submitted that in the present case penalty is levied on the assessee after about 16 years from the date of filing of the first assessment orders without any valid reason/explanation and the same is therefore not valid. 9. We have considered the facts and circumstances of the case and also the case law cited by Mr. Mehta. In the present case in the reassessment for the assessment year 1966-67 an amount of Rs.50,000/- was added as income of the assessee through undisclosed sources. Similarly, in the reassessment for the assessment year 1967-68 the amount of Rs.1,25,000/- was treated as income of the assessee from undisclosed sources. The assessee at no point of time has admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The said orders were set aside and reassessment proceedings started after almost 10 years. The assessee has through out taken a consistent stand that the contention of the tax authorities, that the person/s who had given the loans to the assessee had made a statement that they have in fact not given any loan is incorrect and was made before some other Income-tax Officer in some other proceedings The assessee has consistently contended that the alleged statements were made behind the back of the assessee and the assessee was never given any opportunity to confront them and/or cross examine them. No particulars of any such statement/s are on record. In any event, the said original assessment was set aside and the Income Tax Authorities themselves at the time of reassessment of the assessee's income pertaining to assessment year 1967-68 and assessment year 1968-69 once again tried to summon the parties who had given loans to the assessee. The assessing authority surely did not expect all the parties to come forward with records which by that time were about 15/16 years old. Despite that four of the parties who had given loans to the assessee in the assessment year 1966-67 and who ..... X X X X Extracts X X X X X X X X Extracts X X X X
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