YASHWANT SINGH VS COMMISSIONER OF INCOME-TAX
1996 P T D 676
[212 I T R 207]
[Rajasthan High Court (India)]
Before V. K. Singhal and V. G. Palsikar JJ
YASHWANT SINGH
versus
COMMISSIONER OF INCOME-TAX
D. B. Income-tax Reference No. 10 of 1987, decided on 21/07/1994.
Income-tax---
----Penalty---Concealment of income---Burden of proof---Addition trade on account ' of low withdrawals for- household expenses ---Assessee unable to discharge burden---Levy of penalty valid---Indian, Income. Tax Act, 1961, S.271(1) & (c).
Under section 271(1)(c) of the Indian Income Tax Act, 1961' if any person has concealed his particulars of income or furnished inaccurate particulars of such income, then he is liable for penalty. The word "deliberately" was omitted in this clause and still the word "concealed" contemplates the element of mens rea. The word "inaccurate particulars" have also to be interpreted to mean the action of an assessee as a result of gross or wilful neglect on his part. There may be a case where the additions have been made purely on estimate without going into the details of the expenditure incurred. In such a case, penalty cannot be levied on the figures which are merely based on guesswork or estimate. But, in a case where a detailed enquiry is made and the assessee is confronted with the evidence and has not been in a position to rebut the factual position on the basis of which the additions have been made, the decision stands on a different footing. The Explanation under section 271(l)(c) also contemplates the burden to be discharged by the assessee where the total income returned by any person is less than 80 per cent of the total income assessed. The assessee has to prove that the failure to return the correct income did not arise from any breach or any gross or wilful neglect on his part. The failure of the assessee to prove that there was no breach or any gross or wilful neglect on his part leads to a presumption of concealment of particulars of income or furnishing inaccurate particulars of such income.
In the course of the assessment of the assessee for the assessment year 1980-81, the Income-tax Officer was not satisfied with the low figures of withdrawals of Rs.11,439 on account of household expenses shown by the assessee and made an addition on that account. The Income-tax Officer, after referring to the enquiry report of the Inspector, estimated the educational expenses of the two sons of the assessee, messing expenses, membership fees of Lion's Club and all other household expenses and, as a result, made an addition of Rs. 35,261 to the income of the assessee, treating the same as income from undisclosed sources. The Appellate Assistant Commissioner maintained an addition to the extent of Rs.24,741. The Tribunal maintained the addition at Rs.14,061. The Income-tax Officer initiated penalty proceedings under section 271(1)(c) of the Act and imposed a penalty of Rs.7,000 on the assessee. The Appellate Assistant Commissioner restricted the amount of penalty to 100 per cent of the tax levied. The Tribunal upheld the order of the Appellate Assistant Commissioner. On a reference:
Held, that the assessee had not been able to either discharge the burden which was on him or to lead any evidence so as not to attract the penal consequences. In the penalty proceedings the assessee has a right to submit even fresh evidence which had not been submitted in the assessment proceedings. It was the duty of the assessee to lave offered an explanation, which he completely failed to do. Therefore, the Tribunal was justified in upholding the levy of penalty on the assessee on the basis of the addition on account of low withdrawals for household expenses.
A. K. Rajwanshi for the Assessee.
D. S. Shisodia, Senior Advocate and S. Bhandawat for the Commissioner.
JUDGMENT
V. K. SINGHAL, J. ---The Income-tax Appellate Tribunal has referred the following question of law arising out of it, order dated November 9, 1985, in respect of the assessment year 1980-81 under section 256 of the Act:
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the levy of penalty of Rs.7,000 or, the basis of the addition on account of low withdrawals for household expenses, which hid been added as income on an estimate?"
The brief facts of the case are that the assessee has shown withdrawals of Rs.11,439 on account of household expenses. The Income Tax Officer was not satisfied with this low figures of withdrawals and an addition on that account was made. The Income-tax Appellate Tribunal maintained the expenses at the figure of Rs.25,800. In the assessment order, the income tax Officer referred to the enquiry report of the inspector which was duly signed by the assessee. The two sons of the- assessee were studying in St. Anthony School, the assessee admitted a sum of Rs.720 in respect of school fee and Rs.780 in respect of tuition fee, and the tutors were paid Rs.200 to Rs.300 per month per child during examination days. On that basis, an expenditure of Rs.3,600 was estimated. The messing expenses were explained by the assessee for Rs.6,000 only which were estimated at Rs.300 per person per month. The miscellaneous expenses were admitted at Rs.60 per month for maid servant and Mali. The expenses for washerm an were not included and such expenses were included at Rs.60 per month. The milk expenses for maintaining the cow at the residence at Rs.200 per month were estimated. The water and electricity expenses were explained to have been met by the mother of the assessee but she was having the withdrawal of Rs.2,050 for the whole year, and therefore, such expenses were estimated at Rs.200 per month, keeping in view the fact that refrigerator, air-cooler and other electrical installations are available with the assessee. The Lion's Club membership was admitted at Rs.500 per annum. The expenses for cloth and daily items were admitted at a figure of Rs.2,500 but the Income Tax Officer estimated the expenses at a figure of Rs.200 per month per member for cloth, cosmetics, soap, oil and other luxury items. As a result of this an addition of Rs.35,261 was made, treating it as income from undisclosed sources.
In the appeal before the Appellate Assistant Commissioner, an addition to the extent of Rs.24,271 was maintained. The matter was further challenged by the assessee before the Income-tax Appellate Tribunal, where the addition of Rs.14,061 was maintained by the Tribunal.
The Income Tax Officer initiated penalty proceedings under section 271(1)(c) and after hearing the assessee penalty of Rs.7,000 was imposed. The Appellate Assistant Commissioner came to the conclusion that the assessee furnished inaccurate particulars consciously. The amount of penalty was, however, restricted to 100 per cent of the tax levied. The order of the Appellate Assistant Commissioner was challenged before the order of the Appellate Tribunal. It was found that even during the penalty proceedings or even before the Tribunal, the assessee could not substantiate as to how he could have lived within the amount shown by him. The penalty was upheld. Learned counsel for the assessee submitted that the expenditure estimated and maintained by the Tribunal was only an estimate and, on that basis, penalty cannot be levied.
We have considered the matter. In accordance with the provisions of section 271(1)(c), if any person has concealed his particulars of income or furnished inaccurate particulars of such income, then he is liable of penalty. The word "deliberately" was omitted in the clause and still the word "concealed" contemplates the element of mens rea. The word "inaccurate particulars" have also to be interpreted to mean the action of an assessee as a result of gross or wilful neglect on his part. There may be a case where the additions have been made purely on estimate without going into the details of the expenditure incurred. In such a case penalty cannot be levied on the figures which are merely based on guesswork or estimate. But, in a case where a detailed enquiry is made and the assessee is confronted with the evidence and has not been in a position to rebut the factual position on the basis of which the additions have been made, the decision stands on a different footing. The Explanation under section 271(1)(c) has also contemplated the burden to be discharged by the assessee where the total income returned by any person is less than 80 per cent of the total income assessed. The assessee has to prove that the failure to return the correct income did not arise from any breach or any gross of wilful neglect on his part. The failure of the assessee to prove that there was no breach or any, gross or wilful neglect on his part leads to a presumption of concealment of particulars of income or furnishing inaccurate particulars of such income. From the facts of the present case, it is found that the assessee has not been able to either discharge the burden which was on him or to lead any evidence so as riot to attract the penal consequences. In the penalty proceedings, the assessee has a right to submit even fresh evidence, which has not been submitted in the assessment proceedings. It was the duty of the assessee to have offered an explanation, which he completely failed to adduce. It was in these circumstance, when the Income-tax Appellate Tribunal has observed, "the Appellate Assistant Commissioner was justified in upholding the levy of penalty". In view of the finding recorded by the Tribunal, we are of the opinion that the Income-tax Appellate Tribunal was justified in upholding the levy of penalty on the basis of the addition on account of low withdrawals for household expenses. Accordingly, the reference is answered in favour of the Revenue and against the assessee.
M.B.A./1075/F??????????????????????????????????????????????????????????????????????????????????? Reference answered.