Income-tax---

----Concealment of income by deliberate furnishing of inaccurate particulars-- Burden of proof---Finding in the quantum appeal and the conduct of the assessee and the nature of the explanation offered by the assessee being all relevant considerations while disposing of an appeal against imposition of penalty---Cancellation of penalty by Tribunal without considering the evidence in support of the findings given by the inspecting Assistant Commissioner for imposition of penalty was not justified.

In the presence case the Tribunal had accepted the appeal against the imposition ofpenalty merely on ground that burden of proof was always on the Department and that the mere rejection of the assessee's explanation could not be made a basis for imposing the penalty, even if it might be a good ground for making an addition to total income of the asses see. The Tribunal did not look into the reasonings, which had been given by the Inspecting Assistant Commissioner while imposing penalty. The Tribunal had completely misdirected itself in not considering the detailed reasons given by the Inspecting Assistant Commissioner, not only in the quantum appeal but also in the penalty proceedings wherein the material on record, namely, the explanation of the assessee had been considered at length. The assessee was not able to substantiate his explanation; on the contrary, he kept on shifting his position. He had totally denied the bank account and having any monetary transaction. All these and other matters had not been considered by the Tribunal while cancelling the penalty imposed by the Inspecting Assistant Commissioner. The finding in the quantum appeal and the conduct of the assessee and the nature of the explanation offered by the assessee are all relevant considerations while disposing of an appeal against imposition of penalty. The Tribunal was bound to consider the evidence in support of the findings given by the Inspecting Assistant Commissioner. A good piece of evidence though not conclusive, had been completely ignored by the Tribunal and the Tribunal was not justified in saying that there was no evidence for imposing the penalty by the Inspecting Assistant Commissioner. When the Tribunal had overlooked all these factors, it could not be said that the Tribunal was justified in cancelling the penalty imposed by the Inspecting Assistant Commissioner.

CIT v. Anwar Ali (1970) 76 ITR 696 (SC); D.M.Manasvi v. CiT (1972) 86 ITR 557 (SC); P.M.A.P.Ayyamperumal Nadar v. CIT (1974) 97 ITR 161 (Mad.); Kandaswami Pillai v. CIT (1977) 108 ITR 612 (Mad.) and L.K. Shaik Mohd. Bross v. CIT (1977) 110 ITR 808 (Mad.) ref.

V.K. Sighal for Applicant.

Nemo for Respondent.

JUDGMENT

MOHINI KAPUR, J.--This Court directed the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as "the Tribunal"), under section 256(2) of the Income Tax Act, 1961 (for short "the Act") to draw up the statement of the case and to refer the following question of law arising out of the order of the Tribunal dated January 14, 1975, in respect of the respondent assessee for the assessment year 1947-48: --

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty imposed by the Inspecting Assistant Commissioner under section 271(1)(c) of Act?"

The facts as stated are that the assessee, Chandi Prasad Khaitan, submitted his return for the assessment year 1947-48, but it was found that he had concealed his income of Rs.1,75,000. The assessee had a bank account in the Fountain Branch of Punjab National Bank Limited, Delhi, wherein a sum of Rs.1,00,000 was deposited on April 1, 1947. He could not give a satisfactory explanation for this deposit. First, he made an attempt to deny the existence of this bank account in his name, but, subsequently he admitted that his friend, P.C. Poddar, had remitted the money to him from Calcutta and this amount was returned to him. Shri P.C. Poddar was examined and he admitted having sent the money. The Tribunal did not accept the explanation of the assessee and held this amount to be his income from undisclosed sources.

Another undisclosed sum was Rs.75,000 and the assessee's explanation was that this was proceeds from the sale of ornaments belonging to his wife. After evidence, this explanation was also found to be false and it was held to be his income from undisclosed sources.

When penalty proceedings were initiated, the Inspecting Assistant Commissioner, vide order dated August 24, 1972, imposed penalty under section 271(1)(c) of the Act in the sum of Rs.24,463 being 20% of the tax evaded by the assessee. The assessee preferred an appeal before the Income tax Appellate Tribunal and the Tribunal, by order dated January 14,1975, held that the penalty in the present case was not leviable under section 271(1)(c) of the Act as it is one thing to deem the said two amounts as the assessee's income from undisclosed sources for want of satisfactory explanation, and was an altogether different thing to take the said two amounts as proved items of income in order to impose penalty with regard to the said income. It was also held that the Department had not placed on record any evidence to show that this was the income of the assessee. Thus, the order of penalty was cancelled.

The Tribunal based its decision on CIT v. Anwar Ali (1970) 76 ITR 696 (SC), wherein it was held that if there is no evidence on the record, except the explanation given by the assessee and this explanation is found to be false, it does not follow that the receipt constitutes his taxable income. It cannot be said that the findings given in the assessment proceedings for determining or computing the tax are conclusive. However, this finding was held to be good evidence and it was held that, before imposing penalty, the factum 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.

Learned counsel for the Revenue has accepted that the burden is always upon the Revenue to prove concealment of income or the deliberate furnishing of inaccurate particulars but it has been contended that it would depend upon the facts and circumstances of the case as to whether, on the basis of the incorrect explanation furnished by the assessee, the burden of the Revenue can be said to have been discharged or not. In D.M. Manasvi v. CIT (1972) 86 ITR 557 (SC), it was held that where there was relevant material before the Tribunal to hold that the assessee has deliberately concealed the particulars of his income and it was not a case of inference from the mere falsity of the explanation given by the assessee in the assessment proceedings, penalty was rightly levied. Referring to Anwar Ali's case (1970) 76 ITR 696 (SC), it was held that the present one, namely, Manasvi's case (1972) 86 ITR 557 (SC) was not a case of inference from the mere falsity of the explanation given by the assessee but a case where there was a definite finding that a device had been deliberately created by the assessee for the purpose of concealing his income.

In P.M.A.P. Ayyamperumal Nadar v. CIT (1974) 97 TTR 161 (Mad.), it was held that it is not essential that there should be fresh material at the stage of penalty proceedings to establish that there has been deliberate concealment of income and that the materials gathered at the stage of assessment do not have to be altogether eschewed. The original assessment proceedings are a good item of evidence in the penalty proceedings as well, but it was held that the penalty could not be levied solely on the basis of the finding given in the order of assessment.

Kandaswami Pillai v. CTT (1977) 108 ITR 612 (Mad.) and V.P. Samtani v CIT (1983) 140 ITR 693 (Cal.) are also cases wherein it was held that penalty under section 271(1)(c) can be levied when the assessee concealed his income.

In L.K. Shaik Mohd. Bross v. CIT (1977) 110 ITR 808 (Mad.), it has been held that, in penalty proceedings, the burden of proof is on the Revenue but when there was a finding arrived by the Tribunal based on the material in the assessment proceedings that there was conscious concealment and deliberate avoidance of assessable income by the assessee, then the levy of penalty was justified.

This Court, while calling for a reference in this very case, has observed that the Tribunal has misdirected itself by not considering the detailed reason given by the Inspecting Assistant Commissioner and in not considering its own finding in the quantum appeal that the amount was concealed income.

After considering the contentions of learned counsel for the Revenue and perusing the record of the case, it can be said that the Tribunal has accepted the appeal against the imposition of penalty merely on the ground that the burden of proof is always on the Department and that the mere rejection of the assessee's explanation cannot be made a basis for imposing the penalty, even if it may be a good ground for making an addition to the total income of the assesses. The Tribunal did not look into the reasonings which have been given by the Inspecting Assistant Commissioner while imposing penalty. The Tribunal has completely misdirected itself in not considering the detailed reasons given by the' Inspecting Assistant Commissioner, not only in the quantum appeal but also in the penalty proceedings wherein the material on record, namely, the explanation of the assessee, the version of Shri P.C. Poddar, who is said to have remitted Rs. 1,00,000 to the assessee and also the contention about sale of jeweler and remittance of money have been considered at length. The assessee was not able to substantiate his explanation, on the contrary, he kept on shifting his position. He had totally denied the bank account with Punjab National Bank Limited at Delhi and having any monetary transaction with Shri P.C. Poddar. All these and other matters have not been considered by the Tribunal while cancelling the penalty imposed by the Inspecting Assistant Commissioner. The finding in the quantum appeal and the conduct of the assessee and the nature of the explanation offered by the assessee are all relevant considerations while disposing of an appeal against imposition of penalty. The Tribunal was bound to consider the evidence in support of the findings given by the Inspecting Assistant Commissioner. A good piece of evidence though not conclusive, has been completely ignored by the Tribunal and the Tribunal was not justified in saying that there was no evidence for imposing the penalty by the Inspecting Assistant Commissioner. When the Tribunal has overlooked all these factors, it cannot be said that the Tribunal was justified in cancelling the penalty imposed by the Inspecting Assistant. Commissioner.

The question referred to us is, therefore, answered in the negative.

M.BA./1937/T Question answered.