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Mohammad Shabbir Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 34 of 1980
Judge
Reported in[1984]148ITR111(MP)
ActsIncome Tax Act, 1961 - Sections 256(2) and 271(1)
AppellantMohammad Shabbir
RespondentCommissioner of Income-tax
Appellant AdvocateB.L. Nema, Adv.
Respondent AdvocateB.K. Rawat, Adv.
Excerpt:
- - the ito further observed that failure of the assessee to return the correct income did arise from fraud or gross or wilful neglect arid the assessee would be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income......the appellate tribunal, after giving a maximum possible allowance for savings from agricultural income, held that the assessee was unable to explain the credit to the extent of rs. 10,000. addition of rs. 10,000 was finally maintained. then the ito initiated penalty proceedings under section 271(1)(c) of the act. the assessee had returned income of rs. 4,760, while the income finally assessed was rs. 16,160 after giving effect to the relief allowed by the appellate tribunal. as, according to the ito, the income returned was less than 80 per cent. of the income assessed, provisions of the explanation to section 271(1)(c) were applicable. the ito further observed that failure of the assessee to return the correct income did arise from fraud or gross or wilful neglect arid the assessee.....
Judgment:

C.P. sen, J.

1. This is an application under Section 256(2) of the I.T. Act, 1961, by the assessee for a direction to the Income-tax Appellate Tribunal to state the case and refer the following questions of law:

'(1) Whether, on the facts, and in the circumstances of the case, there is justification in law to hold that the applicant had concealed the particulars of his income or furnished inaccurate particulars of such income for the purpose of Section 271(1)(c) of the Income-tax Act ?

(2) Whether there is material on record to hold that there was fraud or gross or wilful neglect on the part of the applicant so as to bring him within the purview of the Explanation to Section 271(1)(c) ?

(3) Whether by the mere non-acceptance of the explanation given by the applicant, it could be held that there was wilful neglect or fraud on the part of the applicant ?

(4) Whether on the material on record, it could be held that the penal provisions were attracted ?

(5) Whether the imposition of penalty Was legal '

2. The learned counsel for the assessee conceded that all the questions are related and, in fact, the only question that arises is whether, on the facts and in the circumstances of the case, there is justification in law to hold that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income for the purpose of Section 271(1)(c) of the Act.

3. The assessment year involved is 1971-72 with the accounting year ended on Diwali, 1970. This was the first year of the assessee's business. On October 1, 1970, the assessee introduced cash of Rs. 20,000 and on October 4, 1970, cash of Rs. 2,070 in the books of account. The ITO called upon the assessee to prove the nature and source of these credits. The assessee explained that this amount represented his past savings from agricultural income. The explanation was rejected by the ITO and a sum of Rs. 22,070 was added as income of the assessee from undisclosed source. The assessee appealed against this order before the AAC and finally before the Appellate Tribunal. The Appellate Tribunal, after giving a maximum possible allowance for savings from agricultural income, held that the assessee was unable to explain the credit to the extent of Rs. 10,000. Addition of Rs. 10,000 was finally maintained. Then the ITO initiated penalty proceedings under Section 271(1)(c) of the Act. The assessee had returned income of Rs. 4,760, while the income finally assessed was Rs. 16,160 after giving effect to the relief allowed by the Appellate Tribunal. As, according to the ITO, the income returned was less than 80 per cent. of the income assessed, provisions of the Explanation to Section 271(1)(c) were applicable. The ITO further observed that failure of the assessee to return the correct income did arise from fraud or gross or wilful neglect arid the assessee would be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. The AAC confirmed this finding and the quantum of penalty imposed by the ITO.

4. On a further appeal, the Appellate Tribunal maintained the order. It was observed that the assessee had returned income which was less than 80 per cent. of the income ultimately assessed and, therefore, the Explanation to Section 271(1)(c) of the Act was applicable and the ITO specifically invoked the Explanation for levying penalty on the assessee. The assessee had pleaded in the assessment proceedings that the credits were covered by his agricultural income. This explanation was not fully accepted and finally the Appellate Tribunal held that at the most, looking to the extent and nature of the land held by the assessee, cash credit of Rs. 12,000 could be treated as explained. When the penalty proceedings were initiated, the assessee had a chance of furnishing fresh material or evidence to prove availability of funds. No attempt was made by him and no fresh material was produced. The presumption raised by the Explanation to Section 271(1)(c) of the Act was not displaced by the assessee by showing that there was no fraud or gross or wilful neglect on his part. In these circumstances, the authorities below had no option but to hold that under the Explanation, the assessee would be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purpose of Clause (c) of this sub-section. The assessee then filed an application under Section 256(1) of the Act before the Tribunal which was rejected by holding that the finding of the Tribunal was based on facts and no question of law arises therefrom.

5. After having heard the parties, we are of the opinion that the findings of the Appellate Tribunal are based on facts and no question of law arises. We are fortified in our view by a decision of this court in CIT v. Pradeep Shantaram Padgaonkar : [1983]143ITR785(MP) , wherein it was held that the finding of the Tribunal was that there was nothing to show that the assessee was guilty of fraud or gross or wilful neglect in returning the income and it set aside the order imposing penalty on the basis of findings of factrecorded by it on the materials produced on record and, therefore, no question of law arose for reference. Similar is the view taken by other High Courts that no question of law arose out of the Tribunal's order because whether the presumption raised by the Explanation to Section 271(1)(c) had been rebutted or not was essentially a question of fact. [See Addl. CIT v. Thahrayamal Balchand , CIT v. Goswami Smt. Chandralata Bahuji , CIT v. R. Dalmia : [1981]128ITR399(Delhi) , CIT v. Basanta Kumar Agarwalla and CIT v. Dewan Singh Gurbachan Singh ]. However, the learned counsel for the assessee placed reliance on a decision of the Supreme Court in Addl. CIT v. Chandra Vilas Hotel : [1978]115ITR118(SC) , but that case has no application here because in that case the questions were whether in view of the provisions of Section 271(1)(c) of the I.T. Act, 1961, and the Explanation thereto, the Appellate Tribunal was right in cancelling the penalty imposed on the assessee and whether the finding of the Tribunal that the assessee was not guilty of any fraud or gross or wilful neglect in returning income at a figure less than 80 per cent. of the, income assessed was arrived at without considering the entire material on record. Reliance was also placed on a decision of this court in CIT v. Ratanlal Mishrilal : [1983]143ITR929(MP) , wherein it was held that in the instant case the assessee had discharged the burden cast on him by the Explanation to Section 271(1)(c). He had explained that the amount was a loan from his father and unless the I.T. authorities had something more than a mere estimate of the father's ability to save the amount in question, the guilt of concealment could not be held to have been established and no penalty could be levied in the circumstances of the case. It was also observed that the proof necessary under this Explanation is not one as required in a criminal case. If the assessee has tendered proof of such explanation and the Department was not convinced with it, merely on the possibility of its being unlikely, the conclusion that concealment was established would not be warranted.

6. Accordingly, we dismiss the application by saying that no question of law arises. The parties to bear their own costs.


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