TMI Blog1980 (4) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... ner-firm and its partners as already said have earned these incomes during the period 1949 to 1955 but no accounts or documentary evidence in support of the earning and the amount thereof year-wise is available or can be produced. That your petitioner-firm and its partners humbly submit that your goodself may be pleased to spread over-and distribute equally the peak credit amounting to Rs. 4,31,972 for a period of eight years commencing from 2009 Dewali corresponding to I.T. assessment year 1953-54 to 2016 Dewali corresponding to I.T. assessment year 1960-61 and direct the ITO to complete the assessments accordingly by adding each year's amount to the total income previously assessed of your petitioner firm and its partners." The assessee had also prior to these averments stated as follows " That your petitioner firm started introducing cash in the shape of loan in the names of different hundiwallas in the books of account from 2013 Dewali year corresponding to the I.T. assessment year 1957-58. The said procedure of introduction of cash in the shape of loan in the names of different hundiwallas in the books of account of your petitioner-firm has continued up to 2022 Dewali co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned during the period 1949 to 1955. According to the assessee these incomes were earned during the period 1949 to 1955 when due to the Second World War the price of scrap iron and hardware materials went up very high and these profits were kept outside the books of account as cash in hand and were subsequently introduced in the books of account in the shape of hundi loan in the names of different individuals. The ITO, therefore, treated the cash credit amounting to Rs. 1,80,000 as assessee's income from undisclosed sources. He also disallowed a sum of Rs. 4,154 as alleged interest paid to different hundiwallas because these were interests on those fictitious hundi loans. The ITO before completion of the assessment initiated proceedings under s. 271(1)(c) of the I.T. Act, 1961. For the assessment year 1961-62, the assessee filed its return showing an income of Rs. 21,144 under the head " Business ". While examining the books of account of the assessee the ITO found fresh cash credits to the tune of Rs. 1,92,500 in the names of 8 (eight) parties on different dates. It is recorded in the statement of the case that the advocate of the assessee admitted that these credits were not gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been produced to substantiate the contention of the assessee and he imposed penalty of Rs. 90,000 for the assessment year 1961-62. Against the above orders of the IAC, the assessee preferred appeals before the Tribunal. In the quantum appeal for the assessment year 1957-58, the Tribunal reduced the addition by Rs. 55,000 out of Rs. 1,80,000 added to the credit to be found prior to the financial year relevant to that assessment year and the balance of Rs. 1,25,000 was sustained. Since the assessee accepted the additions made in the assessment year 1961-62, there was no assessment appeal to the Tribunal. So far as the appeals for the penalty proceedings were concerned, the Tribunal noticed that the additions in the cash credits were held to be bogus and disallowance of interest on the bogus loans formed the basis in both the years for the initiation of the penalty proceedings and the levy of penalty. It was urged on behalf of the assessee that the addition made in the assessment year 1957-58 was not on account of any detection made by the department with regard to the credits but only on the basis of the admission made by the assessee in its disclosure petition made on 3rd Februa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent had been completed on the basis of the false return then filed by the assessee. But here too it was on the basis of the disclosure made by the assessee on February 3, 1966, a copy of which was furnished to the ITO, that the latter initiated reassessment proceedings and brought to tax the amounts which the assessee admitted in his disclosure to be bogus loans. As pointed out by the Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, it is not as if penalty should be imposed simply because the law provides for it and it will be lawful to make the imposition. The question to be decided in such cases is whether the circumstances of the case would warrant the application of the penal provision. If in a case of this nature this provision is invoked that would only be discouraging the assessee to come out with truth before the falsity in their return is detected. In this view that we take, we hold that in none of these cases the application of the provisions of section 271 (1)(c) was warranted or called for. We hence cancel the penalties imposed in all these cases." Upon this, the following question has been referred to this court under s. 256(1) of the I.T. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g disclosure petition under the Finance Act, 1965 or under the Finance Act II of 1965 (Finance (No. 2) Act, 1965) because in either of those cases the returned income would have been taxed at flat rate of 60% in one case or, under the second Act, though the petitioner was a registered firm it would have been treated as an unregistered firm. Therefore, the assessee would have been in a worse position. In order to avoid this liability to pay additional taxes either on the basis that it was an unregistered firm or being made liable to pay taxes on the basis of 60% (tax rate) the assessee had availed itself of the provisions of sub-s. (4A) of s. 271 of the I.T. Act, 1961, which pre-supposed or proceeded on the basis that there had been acts committed by the assessee which attracted the penal provisions and which made the penalty imposable on the assessee. In those circumstances, it was submitted that the conditions required for levy of penalty had been proved in this case. It was submitted that while the Tribunal took into consideration the factum of the disclosure petition it did not take into consideration the full implication of the disclosure petition under sub-s. (4A) of s. 271 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed income the department had still to prove by independent evidence that the assessee had concealed its income, it would defeat the purpose of the provisions. The levy of penalty for concealment of income was, therefore, justified. It was, therefore, urged on the basis of these observations that in view of the disclosure petition and the conduct of the assessee in respect of disclosing false return for the subsequent year 1960-61 as well as 1957-58 which were admitted by the assessee by the fact of disclosure petition it would not be necessary for the revenue to prove again that the assessee had concealed his particulars of income. Our attention was drawn to a decision of this court in the case of CIT v. P. B.Shah Co. P. Ltd. [1978] 113 ITR 587, where the Division Bench observed that even though the entire onus was on the revenue to prove that the cash credits represented the concealed income of the assessee, yet, where in the statement of case it had been stated that the assessee was willing to have the same treated as its undisclosed income, then in penalty proceedings the department had no further duty to show that the sum was the assessee's concealed income. Since in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it did not follow that the receipt constituted the assessee's taxable income. It would be properly legitimate to say, according to the Supreme Court, that the mere fact that the explanation of the assessee was false did not necessarily give rise to the inference that the disputed amount represented his income. It could not be said that the findings given in the assessment proceedings in determining or computing the tax was conclusive. However, that was considered to be good evidence. Before penalty could be imposed the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. In the assessment year 1947-48, while making the assessment of the assessee, the ITO had discovered an undisclosed bank account of the assessee in which the cash deposit of Rs. 87,000 had been made. According to the assessee's explanation, the same represented diverse amounts entrusted to him by his relatives who had got panicky during the communal riots in Bihar in 1946. The ITO rejected the explanation and computed the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness in the name of fictitious hundiwallas or namelenders and these were shown as being loans, while those were not loans but represented the income made by the assessee in the years prior to 1955. It is true that the assessee did not admit or disclose that these moneys represented his income for the years in question but it also admitted that the assessee was showing these as fictitious loans which, in fact, those were not. If the entirety of the disclosure petition of the assessee is read together, and in our opinion it should be read as a whole, in view of the fact that there is no other evidence adduced by the revenue about the falsity of these transactions apart from the disclosure petition, in our opinion, the disclosure petition read in its proper light indicated that these were income taken from other sources or earnings of the assessee through black market or otherwise introduced in the business in those years. Therefore, the assessee was right in contending that the assessee did not admit these to be the income of the assessee for those years. The revenue was justified in adding these amounts as the income for those years in view of s. 68 of the I.T. Act, 1961, because th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the observations of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, upon which the Tribunal had relied in the instant case. There, the Supreme Court has emphasised that an order imposing penalty for failure to carry out the statutory obligation was the result of a quasi-criminal proceeding and a penalty would not ordinarily be imposed unless a party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty could not be imposed merely because it was lawful to do so. It was not a question here of any technical breach. It was a case of deliberate falsehood. It was not also a case of failure of disclosing something which was not known correctly and that was also not the case of the assessee. The disclosure petition also negatived that contention on behalf of the assessee. So, the principle enunciated by the Supreme Court in the aforesaid decision would not be fully attracted and would not stand in the way of imposing penalty so far as deliberate omission on the part of assessee in disclosing false particulars of income and interest fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the original return was not correct and it could not be said that the assessee had deliberately furnished inaccurate particulars or given a false return. It is true that the disclosure petition or the revised return could not be ignored and this factor must be taken into consideration. But the statement contained in the revised return or the circumstances leading to the filing of the revised return or the statement contained in the disclosure petition and the circumstances leading to the filing of the disclosure petition are relevant factors. If after consideration of these circumstances or the statement contained in the disclosure petition, it became abundantly clear that the original return was false then by merely admitting the falsity of the original return the subsequent return did not become a true statement or the assessee could be said to have not committed an offence for filing inaccurate particulars or false return. Learned advocate for the assessee also drew our attention to the Gujarat High Court's decision in the case of D. V. Patel Co. v. CIT [1975] 100 ITR 524, which more or less reiterated the same position. It also depends on the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition of the penalty bad been applied in the facts and circumstances of this case. On behalf of the revenue, it was urged that the assessee could not be permitted to urge that the disclosure petition did not indicate that the sums disclosed as the bogus income and added as the income of the year were not admitted by the assessee as the income of the assessee for the year in question. Therefore, it was urged that the assessee should not be permitted to agitate this aspect of the matter for the first time before this court when this question was not agitated before the Tribunal. We are afraid that we are unable to accept this position. The position that was agitated before the Tribunal was whether the penalty could be levied in view of the disclosure petition and in view of the other evidence before the authority. That question was wide enough to bring within it the consideration of the question, that is to say, that the disclosure petition did not disclose this income to be the income of the assessee in respect of the particular year. We have set out the same. We have set out from the disclosure petition and given our opinion on the effect thereof. Therefore, in our opinion, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
