COMMISSIONER OF INCOME-TAX VS SOHAN LAL SAVINDER SINGH JAGADHRI
1991 P T D 55
[Punjab and Haryana High Court (India)]
Before Gokal Chand Mital and S.S. Sodhi, JJ
COMMISSIONER OF INCOME-TAX
versus
SOHAN LAL SAVINDER SINGH JAGADHRI
Income-tax Reference No. 22 of 1979, decided on 17/11/1988.
Income-tax---
----Penalty---Concealment of income---Amounts added to assessee's income---Additions confirmed by Tribunal---Finding by Tribunal in penalty proceedings on the basis of material furnished by assessee that there was no concealment of income---Cancellation of penalty was justified. '
In the course of assessment proceedings for the assessment year 1970-71, it was found that the firm, AS, was the assessee's sister-concern and since there was no evidence of any services rendered by the said concern to the assessee, the commission of Rs. 83,482 paid to it was added as income of the assessee. It was also found that drafts of the value of Rs. 29,000 sent by R, accountant of the assessee, related to the business of the assessee and since they were not recorded in the account books, this amount was also added. On appeal, the Appellate Assistant Commissioner deleted the addition of commission but confirmed the addition of Rs. 29,000 on account of the drafts. Both sides took the matter in appeal before the Tribunal. The Tribunal restored the addition on account of commission and dismissed the assessee's appeal in respect of the drafts. In penalty proceedings, it was brought to the notice of the Inspecting Assistant Commissioner that AS was a separate firm and had been allowed registration by the Income-tax Department and hence it could not be considered as the benamidar of the assessee. As regards the drafts, it was explained that R was also doing his own dalali business and had obtained the drafts in his own name. The statement of R in this behalf was recorded. One such draft was prepared by the assessee and the same was duly recorded in the books of account of the assessee. Since the drafts of the total amount of Rs. 29,000 did not relate to the assessee and related to R in respect of his dalali business, they were not entered in the books of account of the assessee. The Inspecting Assistant Commissioner did not accept the explanation and imposed penalty but, on appeal, the Tribunal accepted the evidence and the explanation regarding both the additions and cancelled the penalty. On a reference:
Held, that on the basis of the finding recorded by the Tribunal accepting the material and explanation furnished by the assessee, no penalty was exigible and the Tribunal was right in cancelling the penalty.
C.I.T. v. Mussadilal Ram Bharose (1987) 165 ITR 14 (S C) applied.
Ashok Bhan and Ajay Mittal for the Commissioner.
Bhagirath Dass and Ramesh Kumar for the Assessee.
JUDGMENT
GOKAL CHAND MITAL, J.--On the direction issued by this Court, the Income-tax Appellate Tribunal, Chandigarh, has referred the following question for opinion:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that no penalty under section 271(1)(c) is exigible thus cancelling the penalty imposed upon the assessee by the Inspecting Assistant Commissioner of Income-tax?"
The question arises out of the following facts.
In course of assessment proceedings for the assessment year 1970-71, it was found that Anand Sales Corporation was the assessee's sister-concern and since there was no evidence of any services rendered by the said concern to the assessee, the commission of Rs. 83,482 was added as income of the assessee. It was also found that drafts of the value of Rs. 29,000 sent by Roshan Lai, accountant of the assessee, related to the business 'of the assessee and since they were not recorded in the account books, this amount was also added. On appeal, the Appellate Assistant Commissioner deleted the addition of commission paid but confirmed the addition of Rs. 29,000 on account of drafts. Both the sides took the matter in appeal before the Tribunal and, vide order dated March 18, 1976, it restored the addition on account of commission and dismissed the assessee's appeal in respect of the drafts.
In the penalty proceedings taken under section 271(1)(c) of the Income tax Act, 1961 (for short the "Act"), it was brought to the notice of the Inspecting Assistant Commissioner that Anand Sales Corporation was a separate firm and had been allowed registration by the Income-tax Department, vide order dated March 8, 1971, for the assessment year 1970-71 and since the payment of commission to that Corporation was not disputed, it could not be held that the Corporation was a benamidar of the assessee. On the basis of this explanation and (acts, it was argued that penalty on the amount of commission could not be imposed.
As regards the addition of Rs. 29,000 relating to the drafts, an explanation was furnished stating that Roshan Lai, Accountant, was also doing his own dalali business and had obtained the drafts in his own name. The statement of Roshan Lai in this behalf was also got recorded besides showing that one such draft was prepared by the assessee and the same was duly recorded in their books of account and since the drafts of the total sum of Rs. 29,000 did not relate to the assessee and related to Roshan Lai for his dalali business, they were not entered in the books of account.
On a consideration of the matter, the Inspecting Assistant Commissioner did not accept the explanation and the evidence produced by the assessee but, on appeal, the Tribunal accepted the evidence and the explanation, regarding both the additions and cancelled the penalty imposed by the Inspecting Assistant Commissioner.
Keeping in view the dictum laid down by the Supreme Court in CIT v. Mussadilal Ram Bharose (1987) 165 ITR 14, we are of the opinion that on the basis of the findings recorded by the Tribunal accepting tile material and explanation furnished by the assessee, no penalty was exigible and the Tribunal was right in cancelling the imposition of penalty. Relevant and sufficient material was produced by the assessee by which it discharged its onus to prove that the difference was not owing to gross or wilful neglect or fraud and the Tribunal kept the relevant factors in view while adjudging the case. Accordingly, we answer the question in the affirmative, that is, against the Revenue and in favour of the assessee, leaving the parties to bear their own cost.
Z.S:/.789/T Question answered in affirmative.