TMI Blog1975 (3) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1958-59, the original assessment was completed on March 31, 1959, under the Indian Income tax Act, 1922. On the basis of some information that the assessee had not properly accounted for the investment in a bus and in a building, the assessment was reopened and completed under section 147 of the Indian Income-tax Act, 1961, on June 29, 1963. Section 297(2)(g) of the Act provides that any proceeding for the imposition of a penalty in respect of any assessment completed on or after 1st day of April, 1962, could be initiated and completed under the Act of 1961. The Income-tax Officer, therefore, referred the question of levy of penalty for this year to the Inspecting Assistant Commissioner, who levied penalty of Rs. 24,000. The objection of the assessee before the Tribunal to the penalty proceeding being taken under the Act of 1961 did not succeed. The first question in so far as it relates to the assessment year 1958-59 thus raises the validity of the levy of penalty under section 271(1)(c) of the Income-tax Act of 1961. The answer to this question is concluded by the decision of the Supreme Court in Jain Brothers v. Union of India. For the assessment years 1959- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date on which the construction was completed and the course of construction during the several years. The assessee was also asked to produce the accounts relating to the building construction. There was no response to this letter also. The assessee's authorised representative, who appeared before the Income-tax Officer, informed him that the assessee had not furnished him the required particulars and pleaded helplessness in the matter. The Income-tax Officer was, therefore, compelled to infer that the assessee was refraining from furnishing particulars deliberately for reasons best known to himself. Though it is not clear from the assessment order, it appears from the objection of the assessee to the penalty proceedings that the Income-tax Officer had visited the area and inspected the buildings. After referring to the nature of the construction and the amenities available, the Income-tax Officer estimated the cost of construction of each pair of houses at Rs. 37,500. The total amount that could thus have been spent on construction was thus taken to be Rs. 3,00,000. As there were other common amenities provided, he estimated the cost of such amenities at Rs. 20,000, so that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was taken as that of income from the undisclosed sources not explained by the assessee. For the assessment year 1960-61 the cost of construction to be accounted for was Rs. 1,00,000 as mentioned already. The Income-tax Officer went into the available resources. He held that the income from the bus service in Mysore available to the assessee was Rs. 16,000 and that he could have in addition another sum of Rs. 7,900 being the rental income. After providing for any other savings he estimated the available fund at Rs. 25,000. He held that a sum of Rs. 75,000 was the income from the undisclosed sources. For the assessment years 1959-60 and 1960-61 there was a revision petition filed before the Commissioner of Income-tax. The Commissioner of Income-tax declined to interfere with the addition of Rs. 37,350 made for 1959-60. He gave a reduction of Rs. 40,543 for 1960-61 observing as follows : "However, having regard to the other circumstances of the case, the addition of Rs. 75,000 made for the year 1960-61 is reduced by Rs. 40,543." The addition as reduced for that year thus came to Rs. 34,457. As observed already, for the assessment year 1958-59 the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e points taken was that the Income-tax Officer's determination of the cost of construction of the properties at Rs. 3,20,000 was not proper and was based only on an estimate. The Tribunal pointed out that the assessee's figure of Rs. 1,92,544 for the construction was also an estimate since no accounts were available. It went into the explanation given by the assessee and rejected it. It reduced the penalty by Rs. 6,000 for the assessment year 1958-59, by Rs. 7,000 for the assessment year 1959-60, and Rs. 8,500 for the assessment year 1960-61. The penalties so sustained by the Tribunal are the subject of reference of the first question as mentioned above. In the course of the argument the learned counsel for the assessee submitted that the cost of construction had not been properly taken in the assessment itself, that the assessee was entitled to challenge the cost in the penalty proceedings and that the income-tax authorities and the Tribunal were bound to go into the question as to what was the proper cost of construction so as to find out whether there was or could be any concealment. For the Commissioner of Income-tax the submission made was that the assessee had not produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich it is sufficient to refer to two. The first case is P. M. A. P. Ayyamperumal Nadar v. Commissioner of Income-tax. It was pointed out that the scope of the enquiry and the findings arrived at in the two proceedings, viz., assessment and penalty proceedings, were different and that the findings in the assessment proceedings might be relevant but not conclusive in the penalty proceedings. In R. Srinivasan Co. v. Commissioner of Income-tax, this court again observed, after considering the earlier decisions, as follows : "It is not as if the materials adduced at the assessment stage ceased to be any the less evidence at the stage of the penalty proceedings. It is true, a penalty order cannot be solely based on the reasons given in the original order of assessment. The authorities are expected to consider afresh all the materials available, either produced at the assessment stage or later in the penalty proceedings, without merely proceeding on the basis of the findings given earlier at the stage of assessment and if those materials reasonably point to the conclusion that the disputed amount represented income and that the assessee had deliberately concealed particulars of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's claim. The assessee in that case had attempted to show that the termination of the managing agency was bona fide, as it effected a saving of recurring expenditure. The assessee's endeavour was also to show that the sum of Rs. 18,00,000 paid had actually been recouped by savings of the managing agency commission over a period of about 7 years. The relevant materials placed before the Appellate Assistant Commissioner or the Tribunal had not been taken into account. The Supreme Court, therefore, directed as follows : "We have, therefore, reached the conclusion that the question of law referred to the High Court cannot be answered in view of the defective finding by the Appellate Tribunal which is recorded without consideration of all the evidence. It will be open to the Appellate Tribunal to re-hear the appeal under section 66(5) of the Act and record a clear finding after hearing the parties and after considering all the relevant material in the case as to whether the amount of Rs. 18 lakhs paid by the respondent company to the managing agents on the termination of the managing agency agreement was an admissible deduction under section 10(2)(xv) of the Income-tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
