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Commissioner of Income-tax Vs. Chiranji Lal Shanti Swarup - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 1069 of 1978
Judge
Reported in[1981]130ITR651(All)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantCommissioner of Income-tax
RespondentChiranji Lal Shanti Swarup
Appellant AdvocateR.K. Gulati and ;Ashok Gupta, Advs.
Respondent AdvocateA.R. Dubey, Adv.
Excerpt:
- - the assessee went up in appeal, but failed. cit [1976]102itr787(mad) .as held therein, the charge of concealment cannot be sustained unless there is a clear finding with regard to the amount which is complained as concealed......the assessee imposed a penalty of rs. 25,840 on the footing that that much amount represented the concealed income. he held that the charge of concealment of income has been proved to the hilt against the assessee. the assessee went up in appeal. the tribunal heard the appeal of the assessee on the quantum as w'll as on the penalty side and disposed of them by a common judgment. the tribunal held that the petitioner's case that he had taken a sum of rs. 23,638 from certain other parties to enable him to retire the hundis in question was not proved. the tribunal then addressed itself to the income from undisclosed sources. it observed:'anticipating this position, the assessee had taken the alternative plea that the amount utilised for retirement of hundis had come from the funds lying.....
Judgment:

Satish Chandra, C.J.

1. For the year 1970-71, the Tribunal has referred the following question of law for our opinion :

'Whether, on the facts and in the circumstances of the case, was there any material in support of the finding that penalty was not leviable under Section 271(1)(c) of the Income-tax Act, 1961, in support of the concealed item of income of Rs. 23,500 ?'

2. For the assessment year 1970-71, the assessee which was a partnership firm, returned an income of Rs. 17,480. The ITO did not accept the return and made some additions. The assessee went up in appeal, but failed. The assessee then went up to the Tribunal. Ultimately, the additions of Rs. 23,500 on account of unexplained retirement of certain hundis was upheld by the Tribunal. Other additions were deleted by the Tribunal. During these proceedings, the ITO referred the case to the IAC for drawing up penalty proceedings. The IAC issued the requisite notice and after hearing the assessee imposed a penalty of Rs. 25,840 on the footing that that much amount represented the concealed income. He held that the charge of concealment of income has been proved to the hilt against the assessee. The assessee went up in appeal. The Tribunal heard the appeal of the assessee on the quantum as w'll as on the penalty side and disposed of them by a common judgment. The Tribunal held that the petitioner's case that he had taken a sum of Rs. 23,638 from certain other parties to enable him to retire the hundis in question was not proved. The Tribunal then addressed itself to the income from undisclosed sources. It observed:

'Anticipating this position, the assessee had taken the alternative plea that the amount utilised for retirement of hundis had come from the funds lying outside the books of account, the same having been built up of the trading account additions made by the Income-tax Officer in the preceding three assessment years. This alternative plea was rejected by the Appellate Assistant Commissioner because he found no co-relation between the additions to trading account made in past years with the funds utilised in the relevant accounting year for retirement of hundis. The only thing common in the transactions is that the trading account additions of past years represent secreted profits not reflected in the books of account and the funds utilised for retirement of hundis also are such as had not been entered in the books of account. The latter may have flown from the former but unless the assessee leads evidence to show how exactly this had happened, there cannot be an invariable presumption in favour of the assessee that one is covered by the other. On the facts of the case, we have to hold that the origin of the amount of Rs. 23,500 (in round figures) which was utilised by the assessee-firm in the retirement of hundis on September 10, 1969, remains unexplained.'

3. On the penalty side, the Tribunal recorded the following finding:

'At paragraph 6.7 above, we have held that the explanation furnished by the assessee about the origin of Rs. 23,636 utlised by the assessee for retiring hundis on September 10, 1969, had not been satisfactorily explained and, therefore, the amount (Rs. 23,500 in round figures) could reasonably be treated as the assessee's income from undisclosed sources. But we have also considered the possibility of the said unrecorded amount having come from the unrecorded additional profits for the three years immediately preceding. In this context, we have to hold that no penalty under Section 271(1)(c) is leviable on a charge of the assessee having concealed its income for the assessment year 1970-71 to the extent of Rs. 23,500. The burden on the revenue which lay in this respect has not been discharged. Accordingly, we cancel the penalty.'

4. Learned counsel for the revenue has submitted that, under the circumstances, it is not disputed that the Explanation appended to Section 271(1)(c) was applicable because the returned income was far less than 80% of the assessed income. The Explanation raises a presumption that the income was concealed. The burden lies on the assessee to disprove the fact, or in the alternative, to prove that he was not guilty of fraud or wilful neglect. The Tribunal was in error in holding that the burden lay on the revenue to prove the charge of concealment of income even when the Explanation was applicable. It is true that on facts it is not disputed that the Explanation was applicable inasmuch as the returned income was less than 80% of the assessed income. The Explanation itself raises a presumption that the amount treated as income from undisclosed sources was the concealed income and the burden is shifted on to the assessee to prove otherwise. The observation of the Tribunal that the burden was on the revenue in this respect and the same has not been discharged was, in the circumstances, not in accordance with law.

5. On facts, the Tribunal has expressed its view. It has stated that they have also considered the possibility of the alternative plea raised by the assessee but since the Tribunal was of the opinion that the burden of proving that the amount represented the concealed income was on the revenue, it cannot be said that the ultimate conclusion was not influenced by this burden of proof. If the Tribunal had considered the question of burden of proof in its true perspective, it cannot be said to what ultimate conclusion it may have reached on facts. In this view, the cancellation of the penalty was vitiated by an error of law. The question referred to us hence cannot be answered appropriately unless a fresh finding is given after keeping the correct legal view-point in mind. In such circumstances, we will follow the course adopted by the Supreme Court in CIT v. Greaves Cotton and Co. Ltd. [1968] 69 ITR 200 as followed by the Madras High Court in Muniappa Gounder v. CIT : [1976]102ITR787(Mad) . As held therein, the charge of concealment cannot be sustained unless there is a clear finding with regard to the amount which is complained as concealed. The proper course would be for us to send this case back to the Tribunal with a direction that if may rehear the appeal and decide it in accordance with law keeping the above observations in mind. We make no order as to costs. We order accordingly. The reference is returned unanswered.


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