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Commissioner of Income-tax Vs. Raja Mohd. Amir Ahmad Khan - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberMiscellaneous Income-tax Reference No. 394 of 1966
Judge
Reported in[1975]100ITR433(All)
ActsIncome Tax Act, 1922 - Sections 28(1)
AppellantCommissioner of Income-tax
RespondentRaja Mohd. Amir Ahmad Khan
Appellant AdvocateGopal Behari, Adv.
Respondent AdvocateB.L. Gupta and ;Ashok Gupta, Advs.
Excerpt:
- - then there was a reference to this court but without success. upon a reconsideration also of the evidence already produced by the assessee before the departmental authorities we are of the opinion that it could not be said that it was clearly proved by the department that the said amount of rs. these circumstances in the proceedings under section 34 would clearly show that the income was concealed. the tribunal has given adequate consideration to these circumstances as well as to the other circumstances. although his explanation was not believed, it appears to us that it was not a fantastic or improbable explanation in view of his good financial position......cannot be said to be sufficient to justify the, finding adverse to the assessee in the penalty proceedings. the department has not brought any material on record to show that the amount in question was positively the income of the assessee and that the assessee had concealed the same. upon a reconsideration also of the evidence already produced by the assessee before the departmental authorities we are of the opinion that it could not be said that it was clearly proved by the department that the said amount of rs. 9,45,000 was the income of the assessee or that the assessee had concealed the same. we would, therefore, hold that the penalty as levied by the appellate assistant commissioner is not sustainable and the same should, therefore, be deleted.'9. this summing up of the.....
Judgment:

Dwivedi, J.

1. This is a reference under Section 66(1) of the Indian Income-tax Act, 1922. The Income-tax Appellate Tribunal has referred for the court's opinion this question :

' Whether/on the facts and circumstances of the case, the Tribunal was right in holding that the penalty of Rs. 2 lakhs levied on the assessee was not sustainable in law '

2. It seems to us that the question is not happily framed. We are reframing the question in this manner :

' Whether, on the facts and in the circumstances of the case, the Tribunal's opinion that the penalty of Rs. 2 lakhs could not be levied on the assessee is erroneous in law '

3. We now proceed to deal with the question as reframed by us.

4. The assessee, Raja Mohammed Amir Ahmad Khan, was a Taluqdar. His estate was situated in the District of Sitapur. He was assessed to income-tax for the assessment year 1942-43, the relevant year being the year ending on September 30, 1941. The assessee had income from property, dividends and other sources. The Income-tax Officer assessed him for the relevant year on an income of Rs. 1,00,662. The assessment orderwas made on June 29, 1943. Later on, the Income-tax Officer initiated proceedings under Section 34 of the aforesaid Act in respect of a sum of Rs. 9,45,000. He was asked to give his explanation in respect of this amount.

5. The amount was credited in the amount books of M/s. M. M. Ispahani Co. Ltd., Calcutta, in the assessee's favour. He said that the estate used to pay gujara to his mother and grand-mother. Both of them had accumulated nearly about fifteen and a half lakhs of rupees from their gujara income. Their day-to-day expenses were borne by the estate. When the mother died, the aforesaid amount was found in her almirah. Out of this amount, he deposited a sum of Rs. 9,45,000 with M/s. M. M. Ispahani Co. Ltd. He personally took the amount to Calcutta and deposited it with the said company.

6. In support of his explanation, he examined certain witnesses and produced some account books of the estate. The explanation was rejected by the Income-tax Officer. He was assessed to tax on the sum of Rs. 9,45,000. This amount was treated as his income from other sources. He filed an appeal but it was rejected. Then he went before the Tribunal. There also he did not succeed. Then there was a reference to this court but without success.

7. After the proceedings under Section 34 had come to an end, the Income-tax Officer started the proceedings for imposing penalty on him under Section 28(1)(c) of the aforesaid Act. He was asked to explain why a penalty should not be impose on him for having concealed his income of Rs. 9,45,000. He submitted an explanation. The explanation was the same, which he had given in the proceedings under Section 34. Some additional evidence was produced by him. The Income-tax Officer did not rely on his evidence and imposed a penalty of Rs. 2 lakhs on him. On appeal, the Appellate Assistant Commissioner set aside the order of the Income-tax Officer. But the Income-tax Tribunal set aside the appellate order and directed the appellate authority to rehear the appeal. On remand, the appellate authority agreed with the Income-tax Officer and upheld his order of penalty. But the Tribunal differed from the aforesaid authorities and set aside their orders. The reference has now been made at the instance of the Commissioner of Income-tax.

8. Summing up the survey of the entire facts and circumstances of the case, the Tribunal said :

' The earlier finding of the department (the finding under Section 34 that the sum of Rs, 9,45,000 was the assessee's income from other sources) is not based on the falsity of the claim made by the assessee about the nature of the receipt but is based on their mere holding that it does not prove and their being in doubt whether it was correct or not and, therefore, the materials which the authorities had before them in the assessmentproceedings cannot be said to be sufficient to justify the, finding adverse to the assessee in the penalty proceedings. The department has not brought any material on record to show that the amount in question was positively the income of the assessee and that the assessee had concealed the same. Upon a reconsideration also of the evidence already produced by the assessee before the departmental authorities we are of the opinion that it could not be said that it was clearly proved by the department that the said amount of Rs. 9,45,000 was the income of the assessee or that the assessee had concealed the same. We would, therefore, hold that the penalty as levied by the Appellate Assistant Commissioner is not sustainable and the same should, therefore, be deleted.'

9. This summing up of the conclusion shows that the Tribunal has, after considering the entire evidence, recorded a finding of fact. The finding of fact is that the department has not been able to prove that the sum of Rs. 9,45,000 was the assessee's income and that the 'assesses had concealed it from the view of the income-tax authorities. Now, this court does not sit as a court of appeal over the judgment of the Tribunal. It can re-check the finding of fact recorded by the Tribunal within certain narrow limits. We may interfere with the finding of fact if the finding is based on inadmissible evidence or has been arrived at by ignoring admissible and relevant evidence, or is without support in evidence, or if unreasonable and perverse (vide Sree Meenakshi Mills v. Commissioner of Income-tax 0065/1958 : [1959]35ITR594(SC) ).

10. In G. Venkataswami Naidu and Co. v. Commissioner of Income-tax 0065/1958 : [1959]35ITR594(SC) the Supreme Court followed Meenakshi Mills and added :

' There is yet a third class of cases in which the assessee or the revenue may seek to challenge the correctness of the conclusion reached by the Tribunal on the ground that it is a conclusion on a question of mixed law and fact, and is no doubt based upon the primary evidentiary facts, but its ultimate form is determined by the application of relevant legal principles. The need to apply the relevant legal principles tends to confer upon the final conclusion its character of a legal conclusion. ...'

11. Sri Gopal Behari, counsel for the department, has, in the course of his arguments, urged that the finding of the Tribunal already quoted by us earlier is a mixed finding of law and fact and is subject to our scrutiny. We do not agree with him. As already stated, the finding of the Tribunal is a finding of fact. Section 28(1)(c) does not prescribe any legal standard. So the Tribunal was not required to conform to any legal standard in its conclusion. Section 28(1)(c) requires the Tribunal to record a finding of fact whether the assessee has concealed his income or deliberately furnished inaccurate particulars in respect of his income. Evidently, Section 28(1)(c) does not prescribe any legal standard.

12. It has not been urged by Sri Gopal Behari that the tribunal's findingof fact is based on any inadmissible evidence or has been arrived at byignoring any admissible evidence. He has, however, vigorously maintainedthat the Tribunal has arrived at the finding by ignoring relevant circumstances and that the finding is also unseasonable and perverse. We shallnow consider these arguments.

13. But before we do so, it is necessary to refer to a decision of the Supreme Court in Commissioner of Income-tax v. Anwar Ali : [1970]76ITR696(SC) .It was a case under Section-28(1)(c). The Income-tax Officer and the Appellate Assistant Commissioner had; imposed a penalty on the assessee. In appeal, the Appellate Tribunal reversed their orders and then a reference was made, to the High Court of Calcutta; The High Court, was of opinion that no penalty could be imposed on the assessee in the circumstances of the case. Then there was an appeal to the Supreme Court. The Supreme Court held :

' Section 28(1)(c) is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practises which the legislature considers to be against the public interest, '

14. The Supreme Court further observed that as :

' ......the gist of the offence under Section 28(1)(c) is that the assesseehas concealed the particulars of his income: or deliberately furnished inaccurate particulars of such income, and, therefore, the department must 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. '

15. The finding given in the assessment proceedings, after rejecting the explanation as false, that: a particular receipt is his income would be a piece of evidence in the penalty proceedings. The finding in the previous proceedings that the explanation of the assessee is false would not necessarily lead to the inference that the disputed amount represents his income. The finding is not conclusive. In the end the Supreme Court observed :

' Before penalty can be imposed the entirety of 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. '

16. It appears from the statement of the case and the orders of the income-tax appellate authority and the Tribunal that in the proceedings under Section 34, none of the three authorities had recorded a clear finding that the assessee's explanation was false. The core of the finding as to the explanation of the assessee was that it was not believable. No doubt the Tribunal had at one place said that the explanation of the assessee was' untrue ' and ought to be rejected yet we do not think that the Tribunal has used the word ' untrue ' as a substitute for ' false '. The Tribunal has rejected the assessee's explanation by saying that either it was ' difficult to believe ' or was ' incredible ' and, therefore, in the opinion of the Tribunal, the explanation ought to be rejected.

17. Sri Gopal Behari has submitted that the amount is a huge one. It is not likely that out of gujara given by the estate, the ladies would not have spent a single pie and would have saved the whole of it. It is also not possible to believe that the assessee would have taken Rs. 9,45,000 to Calcutta for the purpose of depositing it with M/s. M. M. Ispahani Co. Ltd. These circumstances in the proceedings under Section 34 would clearly show that the income was concealed. It is further said that the Tribunal did not consider these circumstances. We do not agree. The Tribunal has given adequate consideration to these circumstances as well as to the other circumstances. We are unable to hold that the Tribunal, in fact, has arrived at the finding by ignoring any relevant circumstances. We are also unable to characterise the finding as unreasonable and perverse. In the proceedings under Section 34, the Tribunal has recorded its finding that ' it is true that the amount is a large one but we must also take into consideration the status and position of the assessee and the huge fund that he had at his disposal for earning income and his potential capacities to earn income '. So the assessee is a man of consequence. Although his explanation was not believed, it appears to us that it was not a fantastic or improbable explanation in view of his good financial position. The department produced no evidence to show that the sum of Rs. 9,45,000 was in all probability the income of the assessee from other sources.

18. Sri Gopal Behari has referred us to Commissioner of Income-tax v. Ved Nath Singh, [1940] 8 ITR 222 . and Commissioner of Income-tax v. Indian Woollen Textile Mills, [1984] 51 ITR 291.in support of his arguments. Those cases proceed on their own facts and are not apparently helpful in this case.

19. In view of the foregoing discussion, our answer to the question reframed by us is in the negative. The assessee shall get his costs from the Commissioner of Income-tax, which we assess at Rs. 200. Fee of counsel for the department is assessed at the same figure.


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