TMI Blog1978 (8) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... d office the assessee had shown receipt of commission for sale of jute on account of Tilokchand Jain of Alipurduar and Santokchand Jain of Aluabati. At the assessment the assessee could not produce the statement of accounts showing the details of the said sales, the commission and expenses therefor and the net amount remitted nor the accounts of the said parties in respect of such sales. It was also conceded that the parties themselves would not be available. The ITO came to the conclusion that Tilokchand Jain and Santokchaand Jain were the employees of the assessee and that the profit on sales on their account actually accrued to the assessee. He added Rs. 28,750 as such profit in the assessment made on the assessee-firm. The first point urged before the AAC was regarding the transactions in the names of Tilokchand Jain and Santokchand Jain. In the course of the hearing before him, the AAC examined the accounts of these two parties. He found that the remittances were made almost in all cases only after sales except for Rs. 8,000 and Rs. 10,000 in the name of Santokchand Jain remitted before the sale of the goods. Before the AAC, an affidavit had been filed by Sri Dwipchand Jain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Thus the case attracts penal provisions of the Act and I think that the case deserves deterrent penalty in the circumstances of the case. Having regard to the facts and circumstances of the case, I feel that imposition of penalty of Rs. 25,000 would be adequate and justified. therefore, impose a penalty of Rs. 25,000 u/s. 271(1)(c) read with sec. 274(2) of the I.T. Act, 1961, in the case for the assessment year 1959-60. " Being aggrieved by the said order the assessee preferred an appeal before the Tribunal. The Tribunal by its order dated 9th February, 1968, allowed the appeal. Before the Tribunal various submissions were made on behalf of the assessee including the submission that there was no justification for the levy of the penalty on the facts and that they were bad in law. After referring to the facts in this case and the contentions made on behalf of the assessee and the department, the Tribunal allowed the appeal. While allowing the appeal the Tribunal held as follows : " We have quoted the relevant passage from the order of the Inspecting Assistant Commissioner. It clearly goes to show that the penalty has been levied because the assessee did not co-operate or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of assessment including the conduct of the parties and this was sufficient material from which the conclusion could be drawn as was done by the IAC. Mr. Pal submitted that though there was no direct evidence in this case regarding concealment, there was circumstantial evidence arising out of the facts as stated by the IAC. Those arose after the show-cause notice, in connection with the penalty proceedings, was issued. Accordingly, the Tribunal was not justified in holding that the factual foundation for the levy of penalty was not established. Mr. Sanjay Bhattacharya, learned advocate appearing on behalf of the assessee disputed the correctness of the contentions of Mr. Pal. He has submitted that the law in this case now stands well settled by the decision of the Supreme Court in the case of CIT v. Anwar Ali [1970] 76 ITR 696 and other subsequent decisions. He has referred to in this connection the following other decisions : CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC), Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), D. M. Manasvi v. CIT [1972] 86 ITR 557 (SC) at p. 565. In this connection he has also drawn our attention to three decisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for establishing, in proceedings under section 28, that the disputed amount was the assessee's income. It must be remembered that the proceedings under section 28 are of a penal nature and the burden is on the department to prove that a particular amount is a revenue receipt. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can 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 present case, it was neither suggested before the High Court nor has it been contended before us that, apart from the falsity of the explanation given by the assessee, there was cogent material or evidence from which it could be inferred that the assessee had concealed the particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the 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 will also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. In the case of D. M. Manasvi [1972] 86 ITR 557, the Supreme Court again referred to its earlier decision in Anwar Ali's case [1970] 76 ITR 696, and in this connection observed as follows : " On the basis of the dictum laid down in the above case, it is urged by Mr. Chagla that from the mere fact that the explanation of the assessee in the present case was found to be false it did not follow that the disputed amount represented his income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. In this respect we find that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion that the relevant factual foundation for the levy of penalty has not been established. In this particular case the IAC imposed the penalty only because he was of the opinion that there was a non-co-operative attitude on the part of the assessee. It appeared to him that the assessee was in no mood to furnish either the details of the parties or to produce them for examination. This, in our opinion, does not constitute a cogent or positive material to enable the IAC to impose any penalty. Further, as already stated, the explanation of the assessee, if found to be false is not by itself sufficient for this purpose. In the present case what has merely happened is that the assessee has not produced any material. The assessee has merely. denied any concealment. At the most it can be said that the assessee has taken up the stand not to offer any explanation : but that, in our opinion, is not sufficient. Moreover, in this case the assessee has written a letter denying concealment. In fact what has happened is that the IAC has rejected such explanation but that is not sufficient. In our opinion, what the IAC has done in the present case is that he has put the burden on the assesse ..... 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