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TMI Blog1990 (5) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... et clients, he has engaged persons to whom he has in turn paid commission to the extent of 50% of the commission received by him from the clients brought in by such persons. The assessment of the assessee for Assessment Year 1974-75 was completed by the ITO, wherein the assessee was allowed a deduction in respect of commission payment of Rs. 1,11,565 to one Bachubhai Jamnadas & Co. for introducing to assessee three parties, viz. (1) Bilasrai Joharmal & others, (2) Smt. Gaimain Cawasji Trombaywalla and (3) Smt. Dhanbai R. Trombaywalla for representing in High Court matters pertaining to acquisition proceedings in respect of their lands for Military Projects at Mandala and Trombay Villages. These parties paid commission to the assessee at the rate of 10% of the compensation received by them. The case of the assessee was that 50% of the commission received from these parties was paid in turn as commission to M/s. Bachubhai Jamnadas & Co. vide stamped receipt dated 13-4-1973. It is the case of the assessee that a search had taken place in the premises of M/s Bachubhai Jamnadas and during the search, Shri Bachubhai Jamnadas made a statement denying the receipt of the commission from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several compulsions, as stated above, thought it expedient to offer the amount for taxation. But, it does not mean that this amount represents concealed income of the assessee. According to the counsel for the assessee, the ITO has not examined the land owners and did not make any investigations with the land owners whose names, the assessee had given to verify whether they were introduced to the assessee by Shri Bachubhai Jamnadas or not. It was submitted that since the assessee agreed for disallowance of this commission and offered the same for taxation though commission was in fact paid to Bachubhai Jamnadas, since Jamnadas denied having received it in the course of proceedings under section 132, only to avoid litigation and to buy peace the assessee has not concealed any income, nor has he furnished any inaccurate particulars of the income and therefore, provisions of section 271(1)(a) are not attracted. Considering these submissions of the assessee and the fact that the assessee had not sought to capitalise this amount as the payment had actually been made to Shri Bachubhai Jamnadas, the CIT(A) following the decision of Supreme Court in the case of Anantharam Veerasinghaiah & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avoid protracted litigation and to buy peace with the Department and therefore, this amount was offered for taxation. It is also pointed out that a petition under section 273A was moved, but the same was rejected by the CIT(A) on a mere technical ground without going into the merits of the case. Continuing his arguments, the learned counsel for assessee pointed out that the amount offered for taxation has not been capitalised by the assessee, nor was this amount available with the assessee for making any investment. He submitted that the assessee has documentary proof to establish the genuineness of the transaction, which are filed in pages 25 to 30 of the paper-book. However, in order to avoid litigation, assessee has offered the amount on his own for taxation, which should not mean that the assessee should be fastened with penalty. In this connection, reliance was placed on the decision of Supreme Court in the case of Anantharam Veerasinghaiah & Co., on the decision of Calcutta High Court in the case of Bhagwanji Bhawanbhai & Co. the decision of Punjab & Haryana High Court in the case of Krishan Lal Shiv Chand Rai v. CIT [1973] 88 ITR 293; the decision of Madhya Pradesh High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai Jamnadas & Co., who introduced three parties, whose names were given as above. Assessee accordingly passed on 50% of the commission received from these parties to M/s. Jamnadas & Co. It is not in dispute that at the time of the original assessment, assessee was allowed deduction in respect of this commission paid to M/s. Bachubhai Jamnadas & Co. It is also not disputed that a raid has taken place on the premises of the said M/s. Jamnadas & Co., during the course of which the receipt of this commission was denied when papers in connection with the same were found by the revenue authorities. On the basis of this statement of Shri Bachubhai Jamnadas, assessment of the assessee was reopened and during the reassessment proceedings, assessee in order to avoid litigation and to buy peace with the department, since Shri Bachubhai Jamnadas denied the receipt of commission, agreed to its inclusion in his income and offered the same for taxation. Since assessee offered this amount for taxation, proceedings under s. 271(1)(c) were initiated and penalty was levied as stated above. In this connection, first of all, it is necessary to see the bona fides of the assessee with regard to the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of sub-section (c) of section 271(1) would still be applicable. It may be pointed out at the outset that penalty proceedings are distinct and different from assessment proceedings. Findings in the assessment proceedings are not conclusive but are relevant. The entire material available should be considered afresh by the authorities before imposing penalty. Even after the addition of the Explanation to section 271(1)(c), conscious concealment is necessary. The Explanation provides only a rule of evidence raising a rebuttable presumption in certain circumstances. No substantive right is created or annulled thereby. The substantive law relating to levy of penalty is preserved. The initial burden of proof is cast on the assessee to displace the presumption arising in certain cases. The assessee can discharge the onus either by direct evidence or circumstantial evidence, or both. The cumulative effect of all facts should be taken into consideration. The assessee is entitled to show and establish by the material and relevant facts which may go to affect his liability or the quantum of penalty. The burden is cast on the assessee to prove a negative fact. This can be discha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings but the finding in the assessment proceeding cannot be regarded as conclusive for the purposes of the penalty proceeding. Before a penalty can be imposed the entirety of the circumstances must be taken into account and must point to the conclusion that the disputed amount represents income and that the assessee has consciously concealed particulars of his income or deliberately furnished inaccurate particulars. The mere falsity of the explanation given by the assessee is insufficient without there being, in addition, cogent material or evidence from which the necessary conclusion attracting a penalty could be drawn. " In the case of Bhagwanji Bhawanbhai & Co., before the Hon'ble Calcutta High Court, the facts of the case were that the assessees filed a petition under section 271(4A) in 1965 before the CIT(A) surrendering hundi loans, the peak credit of which was Rs. 2,45,000, with a request to spread it over a period of ten years, and the sum was later brought in the assessee's accounts as its own capital, and the ITO reopened the assessment for the assessment year 1957-58 and also sought to impose penalty under section 271(1)(c). On these facts, the Calcutta High Court obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rise to a question of law but not mere misappreciation, even if there be any from a certain angle. Change of perspective in viewing a thing does not transform a question of fact into a question of law. " From the decisions of the Hon'ble Supreme Court and the Calcutta High Court cited above, it is clear that mere fact that the assessee has agreed to additions to his income, does not automatically mean that the amount agreed to be added was concealed income of the assessee. There may be hundred and one reasons for the assessee to agree to such additions, but that does not absolve the Revenue from proving the mens rea of quasi-criminal offence. Though there are several decisions of other High Courts on this point, referred to and relied upon by the learned counsel for the assessee, in view of the decisions of the Hon'ble Supreme Court and Calcutta High Court discussed above, which are squarely applicable to the facts of the present case, we do not deem it necessary to consider those decisions and discuss the same here. Consequently, applying the principle laid down by the Hon'ble Supreme Court and the Calcutta High Court to the facts of the present case, we do not find any justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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