GOVIND PRESAD MISHRA VS COMMISSIONER OF INCOME-TAX, 2000 PTD-ALLAHABAD-HIGH-COURT-INDIA 3496 (1999)

Income-tax---

----Penalty---Concealment of income---No deliberate concealment on part of assessee---Income from truck purchased in the name of minor son-- Assessee under mistaken belief that income of minor son could be assessed as income of minor and not of assessee---Penalty could not be imposed under S.271(l)(c) of Act---Indian Income Tax Act, 1961, Ss.271(l)(c) & 274.

Held, that the order passed by the Tribunal was not sustainable at law. There was no concealment of income on the part of the assessee. A return was filed by the assessee and a separate return was also filed by his minor son for the income from Truck No. UPF-405. The assessee was under a mistaken belief that the income derived from the truck purchased in-the name of the minor son could be assessed as income of the minor and not as the income of the assessee. The facts disclosed showed that there was no deliberate concealment on the part of the assessee. The imposition of penalty under section 271(l)(c) of the Income-tax Act, 1961, by the Income-tax Officer was on the basis that since the explanation of the assessee was found not to be correct, the penalty proceedings were called for. The authorities did not make any attempt to prove as to whether there was any deliberate concealment on the part of the assessee.

Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax (1980) 124 ITR 15; (1980) 45 STC 197 (SC) rel.

CIT v. Anwar Ali (1970) 76 ITR 696 (SC); CIT v. Zeekoo Shoe Factory (1981) 127 ITR 837 (All.); Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 and (1970) 25 STC 211 (SC) ref.

Vikram Gulati for the Assessee.

Shambhu Chopra for the Commissioner

JUDGMENT

S. L. SARAF, J. ---At the instance of the assessee, the Income-tax Appellate Tribunal has referred under section 256(1) of the Income Tax Act, 1961, the following question of law for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961, in respect of both the years under reference?"

The facts of this case in a nutshell are that the assessee is an individual and was assessed for the assessment years 1971-72 and 1972-73. In the return for the assessment year 1971-72, the income from property was shown as Rs.1,750 whereas income from the business was shown as Rs.1,200. The assessee was assessed on the income of Rs.11,750 for that, year. Similarly, for the assessment year 1972-73, the assessee filed its return showing the income from house property as well as business income as nil. For that year the assesssee was assessed at the income of Rs.11,750. The difference in the business income disclosed by the assessee and determined by the Income-tax Officer was due to estimation of income from two trucks, namely, UPF405 and UPF-444 plied during the relevant previous years. As regards Truck No.UPF-405; the assessee's case was that the same belonged to his minor son, Vijay Kumar, and, therefore, the income from the said truck did not belong to him. As regards Truck No.UPF-444, the assessee claimed that the said truck .was exploited in partnership with two other persons. On the material gathered during the course of assessment proceedings, the Income-tax Officer came to the conclusion that Truck No:UPF-405 was purchased by the assessee in the name of his minor son. As. regards the other truck the Income-tax Officer found that the same was not exploited in partnership as alleged by the assessee. The findings of the Income-tax Officer in respect of both the trucks were upheld by the Tribunal.

During the course of assessment proceedings, the Income-tax Officer initiated proceedings under section 274\271(l)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), and issued notices to the assessee to show cause as to why penalty should not be imposed on him under section 271(l)(c) of the Act. In his letter, dated March 19, 1976, the assessee requested the Income-tax Officer to drop the penalty proceedings in respect of the assessment year 1971-72 on the ground that the assessee had not concealed any fact or material and had disclosed all the facts at the time of assessment. The income from Truck No.UPF-405 belonged to his minor son and, as such, the minor son had filed a separate return of income though the Income-tax Officer had clubbed the said income in the hands of the assessee. There was no mens rea on the part of the assessee. The Tribunal had reduced the amount of taxability of the assessee while confirming the order of the Income-tax Officer holding that no penalty could be imposed without establishing the mens rea. However, the Income-tax Officer was not satisfied with the reply of the assessee and confirmed the penalty imposed on the assessee. As against the said order an appeal was filed before the Appellate Assistant Commissioner who, held that in the penalty proceedings the burden was on the Department to prove the fact and establish beyond reasonable doubt that the assessee had concealed the particulars of income. Merely because the assessment has been completed on a higher income which has been partly confirmed in appeal. by the appellate authorities, the addition does not mean that the facts were completely proved because the assessment could be made for non-production of evidence which is entirely a different matter than penalty proceedings. The case of the Income-tax Officer is based on presumption. The Department had failed to prove that there was concealment on the part of the assessee, as such, the penalty proceedings could not be sustained and the penalty proceedings were cancelled.

As against the said order, the Revenue went up in appeal before the Tribunal, who, however, without expressing any opinion as to whether there was- any deliberate concealment on the part of the assessee to suppress or conceal any income, held that the provisions of the Explanation to section 271(1)(c) of the Act would clearly be attracted in vie of the decision reported in CIT v. Zeekoo Shoe Factory (1981) 127 ITR 837; (1978) UPTC 608.

We have carefully considered the submissions put forward by learned counsel for the assessee and the Revenue. In order to appreciate the submissions of .the parties, we set out the provisions of section 271(1)(c) of the Income Tax Act, 1961, which reads as follows:

"(271).(1)If the Income-tax-Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person---.. .

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income,

he may direct that such person shall pay by way of penalty--...

(iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income:

Provided that, if in a case falling under clause (c), the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall not issue any direction for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner."

A reading of this section makes it abundantly clear that the amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation .is bona fide and all the facts relating to the same and material to the computation of his total income are disclosed, no penalty proceedings could be initiated.

Learned counsel for the applicant has cited a decision reported in CIT v. Anwar Ali (1970) 76 ITR 696 (SC), wherein the Supreme Court has been pleased to hold that the proceedings under section 28 of the Indian Income-tax Act, 1922, are penal in character. The gist of the offence under section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden is on the Department to establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation' given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income. It would be perfectly legitimate to, say that the mere fact that the explanation of the assessee is false, does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. 'Before penalty can be imposed the entirety of the 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.

In the other decision reported in Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC), wherein the Supreme Court has been pleased to hold that an order imposing penalty, for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings and penalty will not ordinarily roe imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances.

In Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax (1980) 124 ITR 15 (SC), wherein it was held by the' Supreme Court that a return cannot be "false" unless there is an element of deliberateness to be due to want of care on the part of the assessee and the is no reasonable explanation forthcoming from the assessee for such want of care, the Court may, in a given case, infer deliberation and the return tray be liable to be branded as a false return. But where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a "false" return inviting imposition of penalty.

In the facts of the present case, admittedly, a return was filed by the assessee and a separate return was also filed by his minor son for the income from Truck No. UPF-405. In that view of the matter, there was no concealment of income on the part of the assessee. The assessee was under a mistaken belief that the income derived from the income of minor son can be assessed as the income of the minor and not as the income of the assessee. The facts disclosed show, that there was no deliberate concealment on the part of the assessee. The imposition of penalty under section 271(1)(c) by the Income-tax Officer was based on assumption and presumption and on the basis that since the explanation of the assessee was found not to be correct, the penalty proceedings were called for. The authorities did not make any attempt to prove as .to whether there was any deliberate concealment on the part of the assessee. In that view of the matter the order passed by the Tribunal is bad and is not sustainable at law. As such, the question raised in the reference is answered in the negative, in favour of the assessee and against the Revenue. There will be no order as to costs.

M.B.A./104/FCReference answered.