PAHULAL VED PRAKASH VS COMMISSIONER OF INCOME TAX
1991 P T D 546
[Allahabad High Court (India)]
Before B.P. Jeevan Reddy, C.J. and R.K Gulati, J
PAHULAL VED PRAKASH
versus
COMMISSIONER OF INCOME TAX
Income Tax Reference Application Nos. 32 and 34 of 1990, decided on 07/05/1990.
(a) Income-tax---
----Penalty---Reference to High Court---Question of law---Imposition of penalty for concealment of income by Assessing Officer confirmed by income-tax Appellate Tribunal---Questions set out before Tribunal for reference to High Court---Mere questions of fact and not questions of law on which Tribunal could not be called upon by High Court to submit the statement of the case to the High Court.
(b) Income-tax---
----Penalty---Concealment---Action of accountant by manipulation in the books of accounts was aimed at benefiting the assessee and not himself-- Question whether Tribunal was justified in not cancelling the penalty, was essentially a question of fact and did not give rise to any question of law in circumstances.
(c) Income-tax---
----Reference---Essentials---Practice and procedure---Held, in order that the Tribunal may be directed to refer a certain question, it was necessary that the same must have been raised in some forum or the other and the Tribunal should have been called, upon to decide the question in exercise of its appellate jurisdiction.
(d) Income-tax--
----Appeal before Income-tax Appellate Tribunal-- -Scope ---Tribunal, while dealing with the appeal, in the absence of any cross-appeal or objection, cannot give a finding adverse to the appellant which would make his position worse than it was under the orders appealed against.
(e) Income-tax---
----Appeal---Penalty---Income-tax Appellate Tribunal, in appeal had no power to enhance penalty if no cross-appeal or objection against assessee had been moved.
(f) Words and phrases---
---- Expression "Whether on the facts and circumstances of the case" used in the questions proposed to be referred to High Court for answer, means nothing more than the facts and circumstances found by the Tribunal and cannot be construed to convey the facts and circumstances that may be found by the High Court on reappraisal of evidence.
Hukumchand Mills Ltd. v. C.I.T. (1967) 63 ITR 232 (SC) and Karnani Properties Ltd. v. C.I.T. (1971) 82 ITR 547 (SC) ref.
JUDGMENT
R.K. GULATI, J.---These are two cross-applications under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), one filed by the assessee and the other by the Commissioner of Income-tax, Kanpur. We shall deal with these applications separately.
The assessee is a partnership firm. The dispute relates to the assessment year 1975-76 and arises out of penalty proceedings under section 271(1)(c) of the Act. The following two questions have been proposed in the application filed by the assessee:---
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in not cancelling the penalty order of the Income-tax Officer under section 271(1)(c) of the Income-tax Act, 1961, relating to the assessment year 1975-76 on the ground that the penalty orders were illegal and not according to law?
(2) Whether, in view of the fact that the Income-tax Officer had levied a penalty below the minimum limit and as such the order of the Income-tax Officer was-illegal, the Tribunal was legally correct in not quashing the order?"
Briefly stated, the relevant facts are these:--
Against the returned income of Rs.1,81,260, the assessment was originally completed, after giving effect to the appellate order, at Rs.1,90,071. Subsequently, a search was conducted at the premises of the firm when account books for the assessment years 1981-82 and 1982-83 were seized. Later on, in pursuance of summons under section 131 of the Act, the assessee produced certain account books for the year in question which were impounded by the assessing authority. While the scrutiny of the seized/impounded books of account was in progress, the assessee came forward with a petition under section 273-A of the Act, disclosing an additional income of Rs.1,90,000. Thereupon, the assessment was reopened under section 148 of the Act. In the course of assessment proceedings, the assessee filed its return declaring a total income of Rs.3,85,783. The assessment was, however, completed on a total income of Rs.4,65,726 making, inter alia, an addition on account of duplicate purchases debited in the purchase account, Rs.1,29,689 being bogus purchases debited in the purchase account, Rs.59,100 being unexplained cash credit and Rs.55,311 and Rs.24,626 on account of profit on suppressed sales. On the quantum side, the Income-tax Appellate Tribunal confirmed the, reassessment order in its entirety except in respect of the amount of Rs.24,626 aforesaid in relation to which the matter was restored to the Income Tax Officer for a very limited purpose to check and remove totalling errors, etc., of which the assessee had made a complaint before the Tribunal.
While completing the reassessment order, the Income Tax Officer had initiated penalty proceedings for concealment of income and, in due course, a penalty of Rs.1,06,417 was imposed which was confirmed by the Income-tax Appellate Tribunal. On refusal of the Tribunal to state the case and the aforesaid questions, the assessee has approached this Court.
Having heard learned counsel for the assessee, we are not satisfied that any one of the two questions set out earlier are questions of law in respect of which the Tribunal should be called upon to submit a statement of the case to this Court.
The only defence put forward by the assessee in the penalty proceedings was that its account books were maintained by its accountant in Punjabi Muria which none of the partners knew and on account of which they could not detect the mischief being committed by the accountant. To substantiate this plea, the argument advanced was that if the assessee knew that some hanky-panky was involved in its accounts, particularly in those books which were with the assessee and which had neither been seized nor found in the search, it would have destroyed the said books rather than produced them before the Income-tax Officer in pursuance of the summons. The assessee pleaded its ignorance about the concealed income and urged that there was no mens rea aimed at defrauding the Revenue and concealment of income and that, therefore, it was not a case fit for imposition of penalty.
The Tribunal has not accepted the case put forward by the assessee. The income brought to tax in the reassessment proceedings was found recorded in the account books maintained by the assessee but it was suppressed by resorting. to devices like under-totalling of purchases, understating the sales and debiting bogus purchases in the purchase account, etc. It was because of the relentless pursuit on the part of the assessing authority to discover the real facts that the income concealed by the assessee was brought to the surface. The assertion on the part of the assessee that he had no knowledge of the concealed income was not found believable particularly in the background that the difference between the returned income and the ultimately assessed income was over two lakhs of rupees. In confirming the penalty order, the Tribunal remarked that it was possible that the assessee did not know as to what was the method adopted by the munim for manipulation of the books of account but the partners would nevertheless know the difference between the real income which had come to their pockets and the income that was being returned by the assessee-firm. It held further that the munim had done manipulation in the books of account with the consent and knowledge of the partners, for it was not the assessee's case that the accountant took away the concealed income by way of defalcation. Taking all the pros and cons, of the case into account, the Income-tax Appellate Tribunal concluded that it was a clear case of concealment within the meaning of section 271(1)(c) of the Act.
Now, the expression "whether, on the facts and circumstances of the case" with which the first question is posed can mean nothing more than the facts and circumstances found by the Tribunal. This expression, as held by the Supreme Court in Karnani Properties Ltd. v. C.I.T. [(1971) 82 I T R 5471, cannot be construed to convey the facts and circumstances that may be found by the High Court, on reappraisal of evidence. The basic question to be decided for imposing penalty under section 271(1)(c) of the Act is whether the assessee has concealed the particulars of his income or has furnished inaccurate particulars thereof. On appreciation of the material on record, the Tribunal has arrived at a finding of fact that the assessee had knowingly understated its income and had furnished inaccurate particulars of such income. On a perusal of the Tribunal's order, we cannot say that the. view taken by the Tribunal on the facts of the instant case was not a plausible one. It is not a case where the findings of the Tribunal are being impeached on the ground that the same are not supported by any legal evidence or that conclusions drawn by the Tribunal were not rationally possible. The action of the accountant (munim) was aimed at benefiting the assessee and not himself. The accountant being an employee of the assessee, responsibility for his wrong action which benefited the assessee, cannot be passed off by the assessee firm on to the shoulders of the accountant who admittedly got not even a single penny out of the concealed income. The entire benefit of the concealed income was retained by the partners and they alone would have to bear the consequences of understating the income of the year in question. In any case, on a given set of facts, the question whether the Tribunal was justified in not cancelling the penalty, in our opinion, is essentially a question of fact and does not give rise to any question of law, Hence, question No.1 does not call for a reference this Court.
Now, coming to the second question, in our opinion, it must also meet the same fate, inasmuch as it does not arise from the order of the Income-tax Appellate Tribunal. During the course of hearing before the Tribunal, it was the departmental representative who had pointed out that the penalty imposed on the assessee was much less than what could have been imposed treating the assessee as an unregistered firm in terms of section 274(2) of the Act which the Income-tax Officer omitted to take into account. It was nobody's case, much less that of the assessee, that the penalty order was not liable to be sustained because a higher amount of penalty could have been imposed or that the amount of penalty imposed being less than the minimum, the penalty order was liable to be set aside. The Tribunal referred to the objections of the departmental representative with a view to repel the contention of the assessee seeking relief in the alternative that the amount of penalty imposed by the Income-tax Officer was excessive. In order that the Tribunal may be directed to refer a certain question, it is necessary that the same must have been raised in some form or other and the Tribunal should have been called upon to decide the question in exercise of its appellate jurisdiction. In the present case, nothing of the kind was done. Accordingly, we reject the assessee's prayer with regard to the second question as well.
This brings us to the application filed by the Revenue in which the following question of law had been raised.
"Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was correct in law in directing that the penalty under section 271(1)(c) will be recomputed after final determination of income but the same will not exceed the quantum of penalty presently under appeal?"
On the quantum side, as noticed earlier, with reference to the addition of Rs.24,626, the matter had been restored to the Income-tax Officer for fresh consideration and, consequently, in appeal relating to the penalty, the Tribunal gave the following directions:
"After the concealed income is determined, the quantum of penalty may be re-determined in the light of such income ...Penalty will, however, in no case, exceed that presently under appeal."
It is because of the above observations that the Revenue has come up in reference suggesting the question extracted earlier.
It is pertinent to point out that, before the Income-tax Appellate Tribunal, the assessee alone was in appeal. The Revenue had not filed any appeal or cross-objection. It is settled that the Income-tax Appellate Tribunal, while dealing with the appeal, in the absence of any cross-appeal or objection, cannot give a finding adverse to the appellant which would make his position worse than it was under the orders appealed against. It is true that the question suggested by the Commissioner is, no doubt, one of law, but the answer to it is, in our opinion, self-evident because the Tribunal has no power of enhancement. See Hukumchand Mills Ltd. v. C.I.T. (1967) 63 I T R 232 (SC). In these circumstances, it would be futile to require the Tribunal to refer the question sought for by the Revenue to this Court. Accordingly, no statable question of law arises. The application filed by the Revenue is also rejected.
In the result, both the applications are rejected.
Z.S./1175/T Applications rejected.