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Commissioner of Income Tax Vs. Khimji Bhanjee and Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberI.T. Ref. No. 11 of 1974
Judge
Reported in(1983)32CTR(Bom)296
ActsIncome Tax Act 1961 - Sections 271(1)
AppellantCommissioner of Income Tax
RespondentKhimji Bhanjee and Co.
Excerpt:
.....found certain credit entries in books of assessee during assessment - assessee could not prove genuineness of credit entry to department being unable to produce required persons for cross examination of department - department imposed tax on assessee and launched penal proceedings for concealment of income - imposition of tax by department accepted - appeal against penal proceedings - department cannot start proceedings until assessee would accept that there was concealment of income - if assessee accepted imposition of tax because he could not produce required persons before department it cannot be inferred that assessee accepted concealment of income - department erred by launching penal prosecution. - - on this, the ito took the view that the assessee had failed to discharge..........the aforesaid assessment year, the ito, while scrutinising the books of accounts, noticed certain cash credits in various accounts. the assessee was asked to prove the genuineness of the cash credit entries. the assessee stated that is was not in a position to produce the persons concerned to prove the genuineness of the credits. the ito worked out the amount of such peak credits and assessed rs. 10,590 as the assessee's income from undisclosed sources. the assessee did not prefer any appeal against this assessment. this assessment was followed by penalty proceedings u/s 271(1)(c) of the it act, 1961. notice was issued for levying by the iac. before the iac, the assessee submitted that it was always short of funds and it was at the mercy of creditors and the creditors could not be.....
Judgment:

Kania, J.

1. This is a reference on a case stated u/s 256(1) of the IT Act, 1961. The assessment year with which we are concerned is the asst. yr. 1968-69. The assessee is a registered firm carrying on business of grains, kirana, oil and so on. During the course of the assessment proceedings in respect of the aforesaid assessment year, the ITO, while scrutinising the books of accounts, noticed certain cash credits in various accounts. The assessee was asked to prove the genuineness of the cash credit entries. The assessee stated that is was not in a position to produce the persons concerned to prove the genuineness of the credits. The ITO worked out the amount of such peak credits and assessed Rs. 10,590 as the assessee's income from undisclosed sources. The assessee did not prefer any appeal against this assessment. This assessment was followed by penalty proceedings u/s 271(1)(c) of the IT Act, 1961. Notice was issued for levying by the IAC. Before the IAC, the assessee submitted that it was always short of funds and it was at the mercy of creditors and the creditors could not be compelled to come to the office of the ITO and give statements. In order to save itself from further botheration, the assessee preferred to accept the addition made to its income by the ITO. The order of the ITO shows that what transpired before him was that when the assessee was asked to explain the above credits, which were made in favour of named parties with adequate evidence and to produce the persons concerned for cross-examination, the assessee expressed its inability to produce the persons and prove the credits. On this, the ITO took the view that the assessee had failed to discharge the burden of proof and brought to tax amount of Rs. 10,590 as the income of the assessee from undisclosed sources. The IAC proceeded to levy penalty of Rs. 10,590 under the amended s. 271(1)(c) of the said Act. On an appeal preferred by the assessee to the IT Appellate Tribunal, the Tribunal allowed the same taking the view that the assessee had not admitted the concealment of income and that merely because the amount of Rs. 10,590 was surrendered for taxation by the assessee this did not ipso facto raise an inference that the assessee admitted that it was his concealed income. From the aforesaid decision of the Tribunal, the following question has been referred to us for our determination :

'Whether, on the facts and in the circumstances of the case, the Tribunal has erred in law in holding that the penalty levied on the assessee u/s 271(1)(c) of the Act for the asst. yr. 1968-60 was not sustainable ?'

2. The submission of Mr. Sajnani, the ld. counsel for the Revenue, is that the assessee had in fact, admitted the concealment of income and hence it was not necessary for the Revenue to prove the same. It was submitted by him that, in view of this, the burden was on the assessee to show that there was no concealment and the conclusion arrived at by the Tribunal was erroneous. He placed strong reliance on the decision of a Division Bench of this Court in Western Automobiles (India) v. CIT : [1978]112ITR1048(Bom) . In our view, it is not possible to accept the submission of Mr. Sajnani. The facts which we have narrated earlier, clearly show that the assessee nowhere admitted that it had concealed any income. All that the assessee did was to admit that there were certain cash credits in its books of account in favour of named parties and that the assessee was unable to produce evidence to show that these cash credits were genuine, as the assessee was not in a position to call the parties in whose favour the cash credits appear, the reason given by the assessee being that it was always heavily indebted and unable to trouble its creditors to give evidence. The aforesaid stand by the assessee can, in our view, never be considered as an admission by the assessee that it has concealed any income. As far as the decision in Western Automobiles (India) (supra) is concerned, facts of that case are altogether different from the facts of the case before us. In that case, when the ITO discovered in the account book of the assessee loans to the tune of Rs. 90,000, he came to the prima facie conclusion that these represented concealed income. The assessee firm agreed to the addition of the aforesaid amount of Rs. 90,000 as its business income for that year and the addition was made by the ITO as the assessee's concealed income from business and not as income from undisclosed sources. In the present case, the assessee has nowhere admitted that it has concealed its income and even the ITO has not added the said amount of Rs. 10.590 as concealed income from business but as from undisclosed sources. In view of this, the said decision in the case of Western Automobiles (India) v. CIT : [1978]112ITR1048(Bom) is clearly inapplicable to the present case.

3. In the result, the question referred to us is answered in the negative and in favour of the assessee. The Commr. to pay the costs.


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