TMI Blog1975 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter referred to as " the 1922 Act "), for the assessment year 1958-59 was served on the assessee on November 15, 1958, requiring the assessee to submit the return of income within 35 days, from the date of the receipt of the notice. The assessee did not submit any return on the due date. He, however, submitted the return on May 25, 1961, which was long after the period of 35 days allowed under the notice. As the assessee had failed to submit the return within the date, a notice dated May 25, 1963, under section 274 read with section 271 of the 1961 Act was issued. The notice was served on the assessee on March 28, 1963. By that notice the assessee was required to show cause why penalty should not be imposed for non-submission of the return within the time allowed. The assessee was asked to show cause on April 11, 1963. The assessee did not comply with the notice. Two other dates, namely, December 29, 1964, and February 12, 1965, were fixed for showing the cause. The assessee did not comply. On March 8, 1965, however, an application was filed on behalf of the assessee. In that application cause of the failure to furnish the return within the time allowed was not shown ; but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 during the course of proceedings under the Act even though notice to the person proceeded against in pursuance of that satisfaction is issued subsequently." At page 563 of the report, their Lordships have further observed : " There is also no force in the submission made on behalf of the appellant that the Income-tax Officer, before feeling satisfied regarding the necessity of initiating proceedings for imposition of penalty and before issuing the consequential notice should have issued another notice to the assessee and held a preliminary enquiry regarding the necessity of initiating proceedings. Such a course, in our opinion, would result in mere duplication of the procedure without any advantage to the parties." The Tribunal has found that the Income-tax Officer was satisfied in course of the proceedings under the Act and before the completion of the assessment and before he signed the notice asking the assessee to explain the cause of his failure to furnish the return within the time allowed. This finding of fact has not been challenged before us. On the scope of question No. 2 there was a controversy before us. The question plainly read and understood means, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner, as the case may be, may, within six months from the date on which he is served with notice of such refusal, apply to the High Court, and the High Court may, if it is not satisfied with the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition, the Appellate Tribunal shall state the case and refer it accordingly ........" " 258. Power of High Court or Supreme Court to require statement to be amended.--If the High Court or the Supreme Court is not satisfied that the statements in a case referred to it are sufficient to enable it to determine the questions raised thereby, the court may refer the case back to the Appellate Tribunal for the purpose of making such additions thereto or alterations therein as it may direct in that behalf." " 260. Decision of High Court or Supreme Court on the case stated.--(1) The High Court or the Supreme Court upon hearing any such case shall decide the questions of law raised therein, and shall deliver its judgment thereon containing the grounds on which such decision is founded, and a copy of the judgment shall be sent under the seal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, in which latter case the question of law may be said to arise out of the order of the Appellate Tribunal. In the case of Kusumben D. Mahadevia v. Commissioner of Income-tax [1960] 39 ITR 540 (SC), their Lordships of the Supreme Court considered the scope of section 66 of the 1922 Act, which provided for the reference of a case by the Appellate Tribunal to the High Court and was essentially equivalent to section 256 of the Act. Their Lordships held : "Section 66 of the Income-tax Act which confers jurisdiction upon the High Court only permits a reference of a question of law arising out of the order of the Tribunal. It does not confer jurisdiction on the High Court to decide a different question of law not arising out of such order. It is possible that the same question of law may involve different approaches for its solution, and the High Court may amplify the question to take in all the approaches. But the question must still be one which was before the Tribunal and was decided by it. It must not be an entirely different question which the Tribunal never considered." The above decision rules that in order that the High Court may have jurisdiction to give an answer to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. (2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it." Their Lordships further observed : A question of law might be a simple one, having its impact at one point, or it may be a complex one, trenching over an area with approaches leading to different points therein. Such a question might involve more than one aspect, requiring to be tackled from different standpoints. All that section 66(1) requires is that the question of law which is referre to the court for decision and which the court is to decide must be the question which was in issue before the Tribunal. Where the question itself w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed bound, in dealing with it, to restrict it to its true content in the light of the findings recorded by the Tribunal. But in dealing with the question, the High Court may not only entertain those aspects of the case which were argued before the Tribunal, but all such aspects as have fairly a direct bearing on the dispute. The jurisdiction of the High Court is by statute not expressly circumscribed in recording its opinion on arguments advanced before the Tribunal, and the nature of the jurisdiction exercised by the High Court does not demand that such a limitation should be implied. The court has jurisdiction to decide questions which arise out of the order of the Tribunal, and not merely those which were raised and argued before the Tribunal." Although the question of burden of proof was not specifically raised in the application made by the assessee for reference, it appears from the order of the Appellate Tribunal that the point was raised before him and he has considered it and given a finding on it. The point arises out of the order of the Tribunal. This is a question of law. Although this point of law was not referred by the Tribunal, under section 260 of the Act, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which must be availed of if the assessee is to be entitled to the benefit of carrying forward of loss in any subsequent assessment, can he take advantage of the provisions of section 22(3) and claim that since he has filed a voluntary return before any assessment has been made and, if it be determined that he has suffered a loss, he is entitled to carry forward that loss. " In the above case, the penalty provisions of Chapter XXI including sections 271 and 274 with which we are concerned in the instant case, did not fall for their Lordships' consideration. In interpreting section 22 of the 1922 Act, which is equivalent to section 139 of the 1961 Act, their Lordships observed at page 529 : " The Income-tax Officer could not have ignored the return and had to determine those losses. Section 24(2) confers the benefit of losses being set off and carried forward and there is no provision in section 22 under which losses have to be determined for the purpose of section 24(2). The question which immediately arises is, whether section 22(2A) places any limitation on that right. This sub-section which has been reproduced before simply says that in order to get the benefit of section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the general notice given under section 22, sub-section (1), or within the extended time, but if it was filed after the expiration of such time, the condition of these words would not be satisfied and set-off and carry-forward of loss would not be admissible. This argument was repelled by Grover J., stating that section 22, sub-section (2A), was merely clarification. It did not add nothing to section 22 nor take away anything from it. Even without it, a loss return could be filed by an assessee within the time allowed under section 22, subsection (1), as also under section 22, sub-section (3), and if such return was filed, the Income-tax Officer would be bound to determine the loss and allow it to be set off and carried forward under section 24, sub-section (2). Sub-section (2A) was introduced in section 22 merely with a view to carry this position. It was not intended to alter that law against the assessee by providing that in order to be entitled to the benefit of set-off and carrying forward of loss, the assessee must file a loss return within the time strictly allowed under sub-section (1) of section 22 and if he failed to do so, he should be disentitled to such benefit. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re exceptions to the general rule. " (i) When there exists a rebuttable presumption of law in favour of a party, the burden of rebutting it lies upon his opponent, and (ii) where the truth of a party's allegation lies peculiarly within the knowledge of his opponent, the burden of disproving it lies upon the latter." (See Halsbury's Laws of England, 3rd edition, volume 15, page 269). Generally, the burden of proof upon any affirmative proposition necessary to be established as the foundation of an issue does not shift, but the burden of evidence or the burden of explanation may shift from one side to the other according to the testimony." ( Wharton's Evidence in Criminal Cases). The above principles of the law of evidence have been ingrained in sections 101 to 114 of the Indian Evidence Act. We may refer to the relevant sections. Section 101 : " Whoever desires any court to give judgment as to any right or liability dependent on the existence of facts which he asserts must prove that those facts exist ......... " Section 102 : " The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side." Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther acts without a licence and observes : " In such a case it would greatly inconvenience the prosecution to prove that the defendant has no licence, whereas the defendant could easily prove that he did have one." It is also well settled that when the defence in a criminal case is one of admission of the act and avoidance of the liability, the burden is on the accused to make good the defence. The penalty proceeding under section 271 of the Income-tax Act, 1961, is a quasi-criminal proceeding, but not a criminal prosecution as such, and, therefore, in our opinion, the doctrine of criminal jurisprudence that the guilt of the accused shall be established beyond reasonable doubt by the prosecution, does not fully apply to a proceeding under section 271 of the Income-tax Act. In other words the department, in the course of any proceeding under the Income-tax Act, in order to levy penalty, need not prove beyond reasonable doubt, negatively, that the assessee has, without reasonable cause, failed to furnish the return of the total income which he was required to furnish. The relevant portion of section 271 of the Income-tax Act, 1961, with which we are primarily concerned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date fixed, namely, June 25, 1961, nor did he furnish the return on two subsequent dates fixed, namely, December 29, 1964, and February 15, 1965, granted to him. But finally on March 8, 1965, he made an application in which two legal pleas were taken ; but the ground of his failure to furnish the return within the time allowed was not disclosed. Undoubtedly, the ground for not furnishing the return within the time allowed, was within the special knowledge of the assessee and the department could not know it. But when the ground was not disclosed by the assessee, which ground was within the special knowledge of the assessee, the Income-tax Officer could reasonably presume that he had no reasonable ground of his failure to furnish the return within time, or the ground, if disclosed, would show that it was unreasonable. This presumption is of course a rebuttable presumption and the burden was upon the assessee to rebut the presumption. He failed to do so. The initial burden of establishing the case has been discharged by the department by the aforesaid presumption that arose against the assessee, and the burden then shifted to the assessee to rebut it but he failed to discharge it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, or guilty of conduct, contumacious or dishonest, or acted in conscious disregard of his obligation. In the instant case the failure of the assessee to submit the return within the time allowed was deliberately in defiance of law, inasmuch as, in his objection petition, only legal grounds were taken and the cause of not furnishing the return within time was not disclosed. He was, therefore, guilty of conduct contumacious or dishonest. In the case of Hindustan Steel Ltd. [1972] 83 ITR 26 (SC) the breach of the provisions of the Act was held to be technical or venial, but in the instant case it was neither technical nor venial. Therefore, Hindustan Steel Ltd.'s case [1972] 83 ITR 26 (SC) is of no assistance to the assessee. That apart, this decision has not dealt with the question of burden of proof in a penalty proceeding. In Anwar Ali's case [1970] 76 ITR 696 (SC), the assessee during the assessment year 1947-48 was a partner in the firm, M/s. Haji SK. Md. Hussain Md. Jan of Calcutta. The Income-tax Officer while making the assessment discovered an undisclosed bank account of the assessee with the Central Bank of India Ltd., at Bettiah, Bihar. It was found that a cash deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence 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." Their Lordships have laid down that in a penalty proceeding, the burden is on the department to prove the assessee's liability for the penalty. But how to discharge that burden depends on the relevant rules of evidence referred to above. The authority has to consider the materials on record and come to a finding on it. In Anwar Ali's case [1970] 76 ITR 696 (SC) itself it has been observed : " Before penalty can be imposed the entirety of 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 particulars of his income or had deli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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