BRIJLAL GUPTA J. - This is an income-tax reference which comes to us on a requisition by this court under section 66(2) of the Income-tax Act. The question which has been referred to us for our opinion is as follows :
'Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the department discharged its burden of proof in establishing that the sum of Rs. 5,000 was income of the assessee within the meaning of the word income as given in section 28(1)(c) of the Income-tax Act ?'
The facts giving rise to the reference may be stated as follows : During the assessment year 1946-47 the Income-tax Officer discovered certain cash deposits in the Amanat Khata of the assessee. The entries were as follows :
Rokar Panna 31 Magh B. 1 Samwat 2,001, i.e., 30-12-44 Byopari ka Rakha ka Nakad ...
Rokar Panna 27 Pus S. 7 (i.e. 22-12-44) Byopari Nakad tha so Deya Gaya ...
Rokar Panna 53 Ch. S. 7 70 Baisakh Samvat S. 9 (i.e., 20-5-45 Nakad Byopari ka ...
Rokar Panna 2,002, i.e., 20-3-45 Nakad Byopari ka ...
The Income-tax Officer added the amount of Rs. 5,000 as the concealed income of the assessee from business. In doing so the Income-tax Officer observed :
'The Amanat Khata shows a deposit of Rs. 3,000 on Pus S. 7 which was withdrawn on Magh B. I. Then again a sum of Rs. 5,000 was deposited on Chait S. 7 and was a withdrawn on Baisakh S. 9. The cash book shows that the cash was received from byopari but the name of byopari is not given. It has been contended by the assessee that Rs. 3,000 was deposited and then withdrawn and thereafter Rs. 5,000 was deposited. The sum of Rs. 3,000 is thus covered by the deposit of Rs. 5,000. However, considering the particular circumstances of the case, I add Rs. 5,000 for profit undisclosed.'
On appeal before the Appellate Assistant Commissioner, this addition was confirmed. He observed :
'For the profit of Rs. 5,000 the name of the depositor is not available in the account books nor any evidence has been given. I am, therefore, not prepared to interfere with the finding of the Income-tax Officer that the sum of Rs. 5,000 represents profits from some undisclosed sources.'
No further appeal to the Income-tax Appellate Tribunal appears to have been filed. It may be stated, as noted by the Appellate Assistant Commissioner, that no evidence was given by the assessee to explain the nature and source of the amount of Rs. 5,000.
The assessment order is at page 12 of our paper-book and it appears from that order that the silver account of the assessee was rejected by the Income-tax Officer as it disclosed too low a rate of profit and even though there were considerable purchases and sales of silver ornaments the details and names of sellers or the names of purchasers were noted in the account books and the profits of the silver set had to be computed by application of the rate.
Thus, so far as the assessment of this amount of Rs. 5,000 to income-tax was concerned, the position was that the mention of the name of byopari not having been made in the account books and, this being so improbable and so contrary to the practice of businessmen, an inference could be drawn that the appellant having chosen not to disclose the real state of affairs, the nature and source of this amount must be different from what appeared from the account books. Further, even though the assessee was required by the income-tax department to place materials before it on the basis of which it could decide whether the amount was the income of the assessee liable to be subjected to tax, the assessee chose not to place any materials before the department to show that it was not liable to tax. The facts were within the special knowledge of the assessee, but the assessee chose to keep mum about the same. This fact could also legitimately lead to the inference that if the assessee had disclosed the true nature and source of this amount the disclosure would have been prejudicial to the assessee. Lastly, by not going in appeal to the Income-tax Appellate Tribunal, the assessee acquiesced in the decision of the department that it was the concealed income of the assessee from business. It has already been stated that omissions were noticed in the account books of the assessee in respect of the silver account and this, along with the omission of the assessee to place materials before the department to enable to hold otherwise, constituted materials on the basis of which the department could legitimately draw the inference that the amount was the concealed income of the assessee from business.
In due course a notice under section 28(3) of the Income-tax Act was issued to the assessee by the Income-tax Officer to show cause why a penalty should not be imposed upon him under section 28(1)(c). In response to this notice the assessee furnished an explanation. The explanation was that due to lapse of four year time since the date of the deposit he could not remember the names of the byoparies from whom the temporary deposits were received. This explanation was rejected by the Income-tax Officer as 'fallacious'. He observed :
'If the assessee wanted to disclose the source from which the money was received it could have been very easy for him to have noted down the names in his account books and the information could have been traced out after the lapse of any amount of time. The name, it appears, was not noted in the account books deliberately. The assessee is certainly not entitled to suppress full facts in his accounts and then try to take advantage of his own fault. In the circumstances the levy of penalty is not only fully justified but absolutely necessary.'
Thereafter the Income-tax Officer went on to consider the past record of the assessee and observed that :
'The past record of the assessee is anything but clean. It is a story of unreliable and rejected accounts and dismissed appeals. For the assessment year 1943-44 the assessee was found to have reduced the totals in the trading accounts and thus concealed the income and a penalty of Rs. 11,000 was imposed under section 28(1)(c).'
Lastly, with respect to the account of the year in question the Income-tax Officer observed :
'The accounts produced by him luck details and I have no doubt that these are deliberately withheld so that the concealment may not be proved to the hilt.'
Thus when the Income-tax Officer came to impose a penalty under section 28 he took into account three further pieces of evidence, which do not appear to have been taken into account by him when he subjected the amount of Rs. 6,000 to income-tax. These three pieces of evidence may be summarised as follows :
'(1) The falsity of the assessees explanation;
(2) The past unclean record of the assessee; and
(3) The present unsatisfactory state of the assessees account books.'
In appeal against the order imposing penalty the Appellate Assistant Commissioner observed :
'The receipts were on dates prior to the dates of withdrawals and curiously enough there were no names of parties from whom these cash amounts were received. If these receipts were really from genuine parties as alleged by the appellant surely the names of the parties would have been noted or otherwise it would not be possible for the appellant to locate who had deposited the amounts and who has got to be repaid.'
He further observed :
'These (the names of the alleged depositors) were not even mentioned before the Income-tax Officer in spite of specific opportunities and even now at the appeal stage names of the alleged depositors are not disclosed. In the circumstances the only inference would be that these deposits were in fact not deposits from outsiders but the appellants own money of the nature of business profit introduced into the books described as receipts from byoparies which is subsequently withdrawn after some time.'
He rejected the assessees argument that the addition of Rs. 5,000 was made on 'inference' and not on positive evidence in the following words :
'The fact that no names of the parties who made the deposit are mentioned in the cash book, is the most unusual feature in the account books. No such information was furnished before the Income-tax Officer or even at the appeal stage. It must therefore be said that these cash credits were not deposits from some outsiders, but were the appellants own money, the nature and source of which was purposely not revealed before the department. In the circumstances it cannot be said that these additions were based on surmises or inference.'
From this it will appear that the Appellate Assistant Commissioner was impressed by the following facts :
'(1) The names of the depositors not having been given was a most unusual feature of the account books.
(2) If the deposits were from genuine parties the names would have been given as it would not be possible to locate the depositors to whom the deposits were to be returned.
(3) The names of the depositors were withheld in spite of specific opportunities and were not disclosed even at the appellate stage.'
The assessee went up in further appeal to the Income-tax Appellate Tribunal. The Tribunal rejected the explanation of the assessee that after the lapse of four years he could not remember the names of the depositors as being 'no explanation at all'. They went on to observe :
'He must have a record of the persons with whom he was dealing in account books and the failure to give the names clearly indicates that he was gambling with the income-tax assessment with the intention that if this item in any way escaped the attention of the Income-tax Officer the assessee would get the benefit of a reduced assessment of income. We, therefore, concur with the department that the assessee was deliberately concealing the source of this income and the penalty is clearly attracted in this case.'
It will at once be noticed that the basis of the finding of the authorities below that the assessee 'concealed the particulars of his income or deliberately furnished inaccurate particulars' was not merely the finding of the materials in the assessment proceedings, but also certain additional materials in the penalty proceedings.
The argument which has been addressed to us by learned counsel for the assessee is that penalty proceedings are penal proceedings. Accordingly, the burden of proof that an assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars is upon the department. He has further argued that the finding in the assessment proceedings cannot form the basis of the imposition of penalty under section 28. And he has urged that in this case penalty has been imposed on the assessee on the basis of findings in the assessment proceedings and it has not been proved positively by the income-tax department on whom the burden rested that the sum of Rs. 5,000 was an item of concealed income or the assessee had deliberately furnished inaccurate particulars in respect of the same. In support of his submission he brought to our notice two decisions, one of the Bombay High Court and the other of the Patna High Court. These will be noticed in due course.
It may, however, be stated at once that from what has been pointed out above it is quite clear that learned counsel is not right in saying that the basis of the findings in the penalty proceedings is the same as the basis of subjecting the amount of Rs. 5,000 to income-tax in the assessment proceedings. There was further material before the authorities in the penalty proceedings and the material was relevant and admissible. In this view the question which has been referred to us must be answered in the affirmative and no other question would arise for consideration.
We shall now deal with the various submissions of learned counsel which he was urged before us at considerable length.
The starting point of learned counsels argument is that proceedings under section 28 of the Income-tax Act are penal proceedings. He has taken his stand on the decision of the Bombay High Court in Commissioner of Income-tax v. Gokuldas Harivallabhdas [ 34 I.T.R. 98.]. In this case it seems to have been assumed that proceedings under section 28 are penal proceedings. This assumption now seems to be doubtful. In C.A. Abraham v. Income-tax Officer, Kottayam [ 41 I.T.R. 425;  2 S.C.R. 765.], the Supreme Court has observed at page 430 that section 28 occurs in Chapter IV of the Income-tax Act. That chapter deals with 'the machinery of assessment'. Penalty under section 28 is imposed as a 'part of the machinery for assessment of tax liability'. Additional tax imposed on an assessee for his contumacious conduct is 'designated' as penalty. From this it seems to follow that there is no essential difference between the tax and the penalty. The liability for payment of both is imposed as a part of the machinery of assessment and the penalty is merely an additional tax imposed in certain circumstances on account of the assessees conduct. Moreover, a taxing statute itself is required to be interpreted 'strictly' like a penal statute and a provision imposing a penalty in a taxing statute is not to be interpreted differently from any other provision. If there is material justifying the finding that an assessee has concealed particulars of income for the assessment purpose, there is no logic behind the view that it is not sufficient to justify it for the imposition of a penalty.
In a recent decision of the Court of Appeal in Inland Revenue Commissioner v. Jackson [ 44 I.T.R. 386 (C.A.).], a case of penalty, it was observed by Lord Justice Sellers at page 392 as follows :
'One can simply take this case as a claim for penalties. It is not a criminal proceeding.'
It was a case in which the Inland Revenue Commissioners claimed penalties from a taxpayer under section 232 of the Income Tax Act, 1952, and earlier Revenue Acts for failure to make income-tax returns. The taxpayer had been required by notices in writing to furnish particulars as to the several sources of his income and he 'without reasonable excuse' had failed to do so within the prescribed time. He admitted that he had not furnished all the particulars required within the time prescribed but denied that he had failed to furnish any such particulars 'without reasonable excuse'. Thereupon, the Commissioners applied for particulars of the denial and the taxpayer was ordered to give the particulars. His plea, that the proceeding being a 'criminal proceeding' he could not be required to give the particulars, was repelled and it was observed that the Commissioners claim, although it was one for penalties, was not a 'criminal proceedings', that the normal rules as to the pleadings in civil actions applied and that the taxpayer must furnish the particulars. It is settled in England and the United States that action for penalties are civil actions, both in form and in substance. In Henner v. United States [213 U.S. 103; 53 L. Ed. 7206.] it was stated by Harlan J., at page 108 :
'It must be taken as settled law that a certain sum,.... prescribed in a statute as a penalty for the violation of law, may be recovered by civil action, even if it may also be recovered in a proceeding which is technically criminal, unless the statute contemplates recovery only by a criminal proceeding.'
He also pointed out that proceedings to recover a penalty remains civil, even though it may partake of a criminal proceeding to an expressed limited extent. It is a civil proceeding, even though the defendant cannot be compelled to be a witness against himself.
In Hanby v. Commissioner of Internal Revenue [67 C. (2d) 125.] it was held that an assessee, who has been convicted for making a false return once under a statute, may be assessed to a penalty for making a false return of income under a different section of the statute without the immunity from double jeopardy being infringed, because the criminal punishment and the civil liability are parts of one penalty. The concept of double jeopardy is usually considered as requiring a criminal prosecution and the imposition of a penalty is not a criminal prosecution but a civil action. One interested in the comments by the Harvard Law Review approving this decision may refer to 47 H.L.R. 1438. We, therefore, cannot accept the contention that the penalty proceedings require a different or stricter standard of evidence than the assessment proceedings or that the evidence that is sufficient for assessment purposes may fall short of that required for the imposition of a penalty.
It was next contended that the sole basis for the imposition of the penalty was the finding in the assessment proceedings that the receipt of Rs. 5,000 by the assessee was income for assessment purposes, but we see nothing illegal in this. Whatever were the materials in the assessment proceedings are materials in the penalty proceedings also and, if they are sufficient to justify the finding in the assessment proceedings that the receipt was income, there is no reason why they should not be sufficient for the same finding in the penalty proceedings. Once it is found in the assessment proceedings that the receipt is income, it follows that there has been concealment of the correct particulars because the receipt has been described in the accounts as a deposit and not as income. The law simply is that the finding in the assessment proceedings is not res judicata or conclusive in the penalty proceedings and the income-tax authorities cannot refuse, in the penalty proceedings, to consider any other material that may be laid before them by the assessee to show that the finding arrived at in the assessment proceedings was erroneous and that the receipt was not income. What the income-tax authorities cannot do in the penalty proceedings is to refuse to hear the assessee and consider the additional materials produced by him or even to reconsider the materials already produced by him in the assessment proceedings. But there is nothing to prevent their holding that the materials produced in the assessment proceedings were sufficient to justify the finding of concealment of the particulars. In Dwarka Prasad Sheokaran Das v. Commissioner of Income-tax [ 24 I.T.R. 410.] it was held by this court that the materials in the assessment proceedings are materials in the penalty proceedings also. The income-tax authorities in the instant case have not refused to receive further materials in the penalty proceedings and have not treated the finding in the assessment proceedings as conclusive or res judicata. We also think that there were some additional materials before them in the penalty proceedings such as that the assessee even then did not explain to their satisfaction the real nature of the receipt. Not only did it fail to produce additional materials to prove that the amount was received from a trader by way of a deposit but also it failed to show that it was a receipt of another nature not assessable to income-tax.
Under the Income-tax Act only income is assessable and not a mere receipt. Every receipt is not assessable, only certain receipts are. The income-tax authorities cannot assess all receipts; they can assessee only those receipts that amount to income. It follows that before they assess a receipt they must find it to be income and they cannot find so unless they have some material to justify their finding. In the absence of sufficient material they cannot treat a receipt as income. Since the nature of a receipt is within the personal or special knowledge of the assessee, the onus lies upon him to prove it; the onus is of proving the real nature of the receipt and not of proving that it is not income. If the materials that he produces satisfy the income-tax authorities that it is not income, they will not asses it and no question of imposition of a penalty will arise at all. If the materials are found to be false, or are not accepted as true, by them, it means that the assessee has not proved that it is a particular kind of non-assessable receipt, but it does not follow as a matter of course that it is assessable. There are several kinds of non-assessable receipts, and a receipt, now shown to be of one kind of non-assessable receipt, may still be of another kind of non-assessable receipt; consequently, the fact that it is not shown to be of one kind of non-assessable receipt does not automatically lead to the inference that it is an assessable receipt, because it can still be of another kind of non-assessable receipt. But if there are additional materials the income-tax authorities may hold that it is not a non-assessable receipt at all; if it does not belong to any kind of non-assessable receipts, it means that it is assessable. The fact that the assessee himself has not explained what other kind of non-assessable receipt it is may be a sufficient circumstance to justify the inference that it does not belong to any kind of non-assessable receipts. An assessee has a motive for concealing the real nature of a receipt, which amounts to income, in order to claim that it is not assessable, but ordinarily he has no motive of concealing the real nature of a non-assessable receipt. If it is a non-assessable receipt it does not matter to him of what nature it is, and ordinarily he will disclose its real nature and not say that it is of a different nature. Consequently, if his claim that it is a non-assessable receipt of a particular kind is found to be false, i.e., it is found not to be of that kind, the income-tax authorities may legitimately infer that it is not a non-assessable receipt of another kind also. Why should he make a false claim when there is nothing to gain If they find that the claim of an assessee that a receipt is a non-assessable receipt of a particular kind is false, they can argue in their minds that it is not a non-assessable receipt of the particular kind alleged, that there was no reason for the assessee to claim that it was a non-assessable receipt of that kind if it was of another kind, that he did not disclose the real nature even subsequently and that it must necessarily be an assessable receipt. If the claim of the assessee, though not accepted, is also not found to be false, this line of reasoning will not be open to them and they will not be justified in treating the receipt as assessable. So long as it can be said that it might be a non-assessable receipt of another kind they cannot treat it as an assessable receipt. In the absence of direct evidence, they cannot treat it as assessable receipt without having materials, such as a false claim, to justify the finding that it is not a non-assessable receipt of any kind. The position is not any different in the penalty proceedings. No penalty can be imposed unless the income-tax authorities find that there has been a concealment of the particular of the assessees income or that he has deliberately furnished inaccurate particulars of it and no such finding can be given unless there are materials to justify it. It is for consideration how far it is correct to speak of onus of proof lying upon the income-tax authorities. Onus of proof lies on a party and not on a tribunal that has to give a finding and the income-tax authorities are tribunals and are strictly speaking not parties. A tribunal cannot be a party before its own self. There can be no question of the income-tax authorities leading evidence to prove any fact; what is required under the law is that they must have materials to justify their finding of concealment of the particulars (or of deliberate furnishing of inaccurate particulars). They had to have materials also for their earlier findings that the receipt was not a deposit but was income and, if the assessee has not been able to produce further materials in support of his claim to show that the earlier finding was erroneous, they can be sufficient for the finding in the penalty proceedings that the receipt was not a deposit but income. If a receipt is income but is disguised in the accounts or in the return as a non-assessable receipt, it is clearly a case of concealment of the particulars or of furnishing inaccurate particulars of income and a penalty under section 28(1)(c) can be imposed on the assessee. The income-tax authorities must arrive at a clear finding of concealment of the particulars and there must be material before them to justify the finding. There is no warrant for saying that they must have some materials in addition to those that were before them in the assessment proceedings and on the basis of which they had found that the real nature of the receipt was other than that stated in the accounts or in the return. It is only when they base their earlier finding not on the falsity of the claim made by the assessee about the nature of the receipt but on their mere holding it not proved, or on their being in doubt whether it was correct or not, that the materials they had before them in the assessment proceedings can be said to be not sufficient to justify the finding adverse to the assessee in the penalty proceedings.
This statement of the law is supported by a decision of this court in Mithoo Lal Tek Chand v. Commissioner of Income-tax [ 23 I.T.R. 494.] and Khemraj Chagganlal v. Commissioner of Income-tax [ 38 I.T.R. 523.], where the Patna High Court observed at page 527 :
'If the explanation offered by the assessee in the assessment proceeding was deliberately false, it is possible to argue that there was some material before the Income-tax Appellate Tribunal which justified the imposition of penalty upon the assessee under section 28(1)(c) of the Act.'
Nothing that we have said militates against the decision of the Bombay High Court in Commissioner of Income-tax v. Gokuldas Harivallabhdas [ 34 I.T.R. 98.]. Our attention was drawn to the following observation in it at page 105 :
'The charge against him (the assessee) is that he gave inaccurate particulars about his income, and it is not possible to infer from the falseness of the assessees explanation that the receipt necessarily constituted an income of the assessee.'
This is exactly what we stated earlier; the falsehood of the claim that the receipt is a non-assessable receipt of a particular kind does not automatically and in every case lead to the inference that it is assessable income because it might be a non-assessable receipt of another kind. The inaccuracy in the particulars may have no bearing on the question whether the receipt is assessable or not; one can give inaccurate particulars of a non-assessable receipt also.
There was sufficient material in the instant case for holding that the claim made by the assessee that the amount of Rs. 5,000 was a deposit and not income was false and also for the finding that it was income. Since the particulars given by the assessee in the accounts and in the return were different, it was a clear case of concealment of or furnishing inaccurate particulars and the income-tax authorities were justified in imposing the penalty.
In the result the question referred to us is answered in the affirmative. Let the reference be returned with this answer to the Tribunal.
The opposite party shall get its costs of the reference, which we assess at Rs. 200, from the assessee.
Question answered in the affirmative.