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Mirzapur Construction Company Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 183 of 1976
Judge
Reported in[1980]122ITR828(All)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantMirzapur Construction Company
RespondentCommissioner of Income-tax
Appellant AdvocateV.B. Upadhya and ;V.K. Upadhya, Advs.
Respondent AdvocateR.K. Gulati and ;A. Gupta, Advs.
Excerpt:
- - 18,000. in doing so, he relied upon the explanation added to section 271(1)(c) which cast the onus on the assessee to prove that the failure to return the correct income was not due to any gross or wilful neglect on his part......contract business. taking these facts into consideration it held that the assessee had filed inaccurate income return, and, therefore, penalty was leviable under section 271(1)(c). however, in view of the fact that the assessee had co-operated with the department by filing a revised return, it reduced the quantum of penalty. 3. counsel for the assessee urged that on the material available on the record it could not be held that the assessee had concealed the particulars of his income or furnished inaccurate particulars. it is pointed out that the mere fact that the assessee had agreed to the applicability of a higher rate of profit did not by itself establish that the assessee was guilty of any concealment. in support of these contentions, he has drawn our attention to two decisions, one.....
Judgment:

C.S.P. Singh, J.

1. The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following question for our opinion:

' Whether, on the facts and in the circumstances of the case, there was any material for the finding that the assessee concealed its income and furnished inaccurate particulars of its income within the meaning of Section 271(i)(c) of the Income-tax Act, 1961 '

2. The assessee is a registered firm and took out Government contracts. In the year in question, he took out a contract for building a road from Rihand to Singhrauli. A return showing the net income of Rs. 24,814 was filed, which was 1.5% of the contract money received which were to the tune of Rs. 20,46,978. On the 20th February, 1968, counsel for the assessee appeared before the ITO, and discussed the case, and agreed that a net rate of 6.5% be applied to those payments received in each of the years relevant to the assessment years 1964-65 to 1967-68. A revised return was also filed for these years. The ITO, however, did not accept this return, but took the income from contracts at Rs. 2,04,968, and included in the total income an amount of Rs. 1,38,082 as income from other sources, being amounts deposited by the partners during the course of business. He, thus, computed the total income at Rs. 3,42,780. The assessee appealed, and the appeal was accepted as the assessee's income was asssessed by applying the rate of 6.5% to the gross receipts from contracts. So far as the addition of Rs. 1,38,082 was concerned that was scaled down to Rs. 21,709. Both the department and the assessee appealed. The G. P. rate of 6.5% agreed to by the assessee in respect of contracts taken out by him was accepted. So far as the addition in respect of unexplained credit was concerned, the assessee did not challenge it, but urged that the same was reflected in his trading account and as such no separate addition on this score was called for. This contention was accepted. As a result, the appeal filed by the assessee was partly allowed, and that of the department dismissed. As a consequence of the addition made, the ITO issued notice under section 271(1)(c) against the assessee. As the amount of penalty impos-able exceeded Rs. 1,000 the matter was referred to the IAC. The IAC held that the assessee was guilty of concealment, and had furnished inaccurate particulars, and as a consequence imposed a penalty of Rs. 18,000. In doing so, he relied upon the Explanation added to Section 271(1)(c) which cast the onus on the assessee to prove that the failure to return the correct income was not due to any gross or wilful neglect on his part. The assessee then appealed to the Tribunal. The Tribunal noticed the fact that the assessee had filed a return showing a G.P. rate of 1.5% but subsequently he revised it, and disclosed a G.P. rate of 6.5%. On the basis of this, it concluded that the assessee had not shown its correct income in the original return. So far as the revised return is concerned the Tribunal took the view that the assessee had not been able to satisfactorily explain as to how he agreed to the imposition of a rate of 6.5% on his gross receipts from contracts and no advantage could be given to the assessee for filing the revised return. It then considered the question of addition of Rs. 21,709 as income from unexplained cash credits. It noticed the fact that the assessee had not tried to explain these cash credits in the quantum appeal, but had only urged that benefit for these amounts should be given against the addition made in the trading account. From this fact, the Tribunal concluded that the cash credit claimed formed additional income from contract business. Taking these facts into consideration it held that the assessee had filed inaccurate income return, and, therefore, penalty was leviable under section 271(1)(c). However, in view of the fact that the assessee had co-operated with the department by filing a revised return, it reduced the quantum of penalty.

3. Counsel for the assessee urged that on the material available on the record it could not be held that the assessee had concealed the particulars of his income or furnished inaccurate particulars. It is pointed out that the mere fact that the assessee had agreed to the applicability of a higher rate of profit did not by itself establish that the assessee was guilty of any concealment. In support of these contentions, he has drawn our attention to two decisions, one of the Patna High Court and the other of this court, the cases being Addl. CIT v. Kashiram Mathura Prasad : [1979]119ITR497(Patna) and Addl, CIT v. Kishan Singh Chand : [1977]106ITR534(All) . The ratio of the decision of this court in the case of Kishan Singh Chand is not applicable, for, in that case, the assessee had agreed to an enhanced rate of G.P. because some of the expenses recorded in his books of account were not verifiable, and, further, the agreement for being taxed at a higher rate was on account of the undertaking given by the ITO that he would not impose any penalty. In the present case apart from other things, the cash credit entries standing in the books of the assessee could not be satisfactorily explained, and the Tribunal has held that these represented additional income of the assessee from contract business. Thus, the cash credit in the account books of the assessee, on the findings recorded by the Tribunal, was its concealed income. The record does not disclose that the ITO had agreed not to take any legal action in case the assessee agreed to be assessed at a higher rate. This being so, the principle laid down in Kishan Singh Chand's case : [1977]106ITR534(All) is inapplicable. Coming now to the Patna decision. The decision in favour of the assessee was reached on account of the view taken by that court that before penalty under section 271(1)(c) can be imposed the revenue must establish that the return furnished was inaccurate to the knowledge of the assessee or was the result of wilful or gross neglect on his part. Had the case not been approached from this point of view the decision would have been otherwise. This court in the case of Rukmani Bahu v. Addl. CIT : [1979]116ITR468(All) had occasion to discuss the effect of the Explanation added to Section 271(1)(c), which raised a presumption of concealment and filing of inaccurate particulars in cases where the returned income falls short of 80% of the assessed income. It was held that after the amendment of the Explanation, the department is not saddled with the onus of proving that the assessee was guilty of concealment or filing of inaccurate particulars, but the onus was on the assessee to prove that the returns filed by him was not due to any gross or wilful neglect on his part. In view of the principle laid down in Rukmani Bahu's case : [1979]116ITR468(All) , we are unable to approach this case on the lines indicated the material on the basis of which the Tribunal has recorded the finding that the assessee concealed its income (sic). The facts relied upon by the Tribunal for reaching this conclusion were relevant, and constituted sufficient material on the basis of which such a conclusion could be reached. The assessee has also not been able to discharge the onus that lay on him in view of the Explanation, and as such the penalty was rightly imposed.

4. We, accordingly, answer the question in the affirmative, in favour of the department and against the assessee. In the circumstances, there shall be no order as to costs.


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