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1989 DIGILAW 60 (CAL)

COMMISSIONER OF INCOME-TAX v. MOTILAL AND CO.

1989-02-22

BHAGABATI PRASAD BANERJEE, SUHAS C.SEN

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SUHAS CHANDRA SEN, J. ( 1 ) THE following question of law has been referred by the Tribunal under Section 256 (1) of the Income-tax Act, 1961 ("the Act"):"whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty imposed under Section 274 (2) read with Section 271 (1) (c) of the Income-tax Act, 1961. " ( 2 ) THE dispute relates to a penalty order. The assessee filed a return of income on September 17, 1966, showing business income of Rs. 12,096 only. Thereafter, it filed a disclosure petition before the Commissioner and claimed exemption from penalty under Section 271 (4a) of the Act The disclosure related to the assessment years 1959-60 to 1965-66 and covered a total amount of Rs. 1,20,000. It was accepted in the disclosure petition that the amount was introduced by the assessee in certain benami hundi loans in its books of account and that it represented its segregated profits from business. Before such disclosure came up for consideration, the Income-tax Officer took up the assessment for the assessment year 1964-65. It may by noted that the disclosure petition was later on rejected by the Commissioner. ( 3 ) THE Income-tax Officer made enquiries about the genuineness of the four hundi loans which are mentioned hereinbelow : Sl. No Name Date Rs. 1. Nathmal Bantia 19-3-1964 25,000 2. Bantia Bros. 23-3-1964 25,000 3. Bantia Bros. 26-3-1964 25,000 4. Ash Karan Bantia 28-3-1964 30,000 Total 1,05,000 ( 4 ) IN the course of the enquiry, the assessee was given an opportunity to adduce evidence but it declined to avail of it on the ground that it had already made a disclosure to the Commissioner under Section 271 (4a ). The assessee, however, surrendered the above credits for inclusion in its total income. The Income-tax Officer in its assessment order observed : "when asked to explain the nature and source of these credits, the assessee contended that there is no evidence and fact; the assessee offered the sums for taxation as the undisclosed income of the firm. " ( 5 ) THE Income-tax Officer was of the view that the assessee was guilty of concealment. Since the maximum penalty imposable exceeded a sum of Rs. 1,000, the Income-tax Officer referred the case to the Income-tax Appellate Tribunal under Section 274 (2) of the Act. " ( 5 ) THE Income-tax Officer was of the view that the assessee was guilty of concealment. Since the maximum penalty imposable exceeded a sum of Rs. 1,000, the Income-tax Officer referred the case to the Income-tax Appellate Tribunal under Section 274 (2) of the Act. ( 6 ) THE Inspecting Assistant Commissioner, after elaborate discussion of the matter, held that the assessee had concealed the income of Rs. 50,000 only and imposed a penalty of Rs. 32,900. ( 7 ) THE assessee appealed to the Tribunal and contended that the case did not call for any penalty. The Tribunal, after elaborate discussion of the facts, came to the finding that the amount of Rs. 50,000 brought to tax by the Income-tax Officer related to only a part of the credits of Rs. 1,05,000 appearing in the names of four parties in the assessee's books of account and that the disclosed amount was not brought to tax by him on the ground that it was covered by the peak amount of Rs. 1,05,000 appearing in the assessment year 1963-64, i. e. , the year earlier to the year under reference. In view of this finding, the Tribunal did not consider it necessary to discuss the impact of the disclosure petition on the present penalty proceedings. According to the Tribunal, the position that emerged was that the Income-tax Officer noticed certain credits in the books of account of the assessee which were surrendered for want of evidence or because the assessee was unable to prove them and that the addition, in these circumstances, could not be subjected to any penalty in view of the decision of the Punjab and Haryana High Court in the case of Gumani Ram Siri Ram v. CIT [1972] 85 ITR 67. The Tribunal further observed that there was no evidence other than the above admission of the assessee that the disputed amount represented its income. The Department had not been able to gather any such evidence. ( 8 ) THIS being a case of imposition of penalty, the onus lies on the Department to bring sufficient material on record to justify the order of penalty. The Tribunal's finding is that there is no evidence on record to that effect. The admission of the assessee which had been rejected by the Commissioner ultimately, had been duly considered by the Tribunal. The Tribunal's finding is that there is no evidence on record to that effect. The admission of the assessee which had been rejected by the Commissioner ultimately, had been duly considered by the Tribunal. Apart from this admission which was duly considered by the Tribunal, admittedly, no other evidence was brought for imposition of penalty. ( 9 ) THE finding of fact of the Tribunal that there was no evidence other than what had been admitted by the assessee to show that the disputed amount represented the assessee's income has not been challenged as perverse. ( 10 ) IN view of the findings made by the Tribunal and in view of the observations made by the Tribunal, as set out hereinabove, the question must be answered in the affirmative and in favour of the assessee. ( 11 ) THERE will be no order as to costs.