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Sunder Lal Mohinder Pal Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 67 of 1976
Judge
Reported in[1982]135ITR80(P& H)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantSunder Lal Mohinder Pal
RespondentCommissioner of Income-tax
Appellant Advocate B.S. Gupta, Adv.
Respondent Advocate D.N. Awasthy and; B.K. Jhingan, Advs.
Excerpt:
- sections 80 (2) & 89 & punjab motor vehicles rules, 1989, rules 85 & 80: [t.s. thakur, cj, jasbir singh & surya kant, jj] appeal against orders of state or regional transport authority imitation held, a stipulation regarding the period of limitation available for invoking the remedy shall have to be strictly construed. that is because any provision by way of limitation is in the nature of a restraint on the remedy provided under the act. so viewed two inferences are clear viz., (1) sections 80 and 89 of the act read with rule 85 of the rules make it obligatory for the authorities making the order to communicate it to the applicant concerned and (2) the period of limitation for any appeal against the order is reckonable from the date of such communication of the reasons would imply..........the ito came to the conclusion that most of the entries in the note book were reflected in the account books of the assessee and thus all the transactions were not kept outside the books of account of the assessee. the entries in the note book were for a period of about three months at the end of the accounting year and the total of such entries was about rs. 45,000. the ito, therefore, came to the conclusion that rs. 45,000 had been invested by the assessee in purchase and sale of gold ornaments and as the nature and source of this investment was not satisfactorily explained, the amount of rs. 45,000 was treated as the assessee's income from undisclosed sources. the total income was thereafter computed at rs. 74,660.2. the assessee filed an appeal. the aac set aside the assessment.....
Judgment:

B.S. Dhillon, J.

1. The assessee is a registered firm and carries on the business of money-lending and sarafa. The previous year for the assessment years 1969-70 ended on March 31, 1969. A return of income was filed on August 26, 1969, declaring a total income of Rs. 28,620. On September 3, 1969, the business premises of the assessee and its partners were searched and, during the course of the search, a note book called YadashatBahi was recovered from the premises of Shri Sunder Lal, one of the partners. This diary was found containing entries of certain sales of ornaments to various parties mentioned therein. The ITO made enquiries from some of the parties mentioned in the note book, who admitted that they had got gold ornaments prepared from the assessee, for which different sums were paid by them. The assessee was furnished with this information and was given an opportunity to explain. The assessee pleaded that the so-called note book was in loose sheets which were got stitched by the officer, who conducted the raid and that the said note book only contained 'kacha record' of the ornaments taken by the customers on approval. The assessee pleaded that if the goods were finally approved, the regular bills were made and in case of disapproval of the goods, no entry was made in the regular books of account. In support of his plea, the assessee produced the customers, whose names found mentioned in the diary. The said persons supported the case of the assessee. However, the ITO did not accept the statements of these parties and held that the assessee sold certain ornaments and kept the sale proceeds out of the books of account. The assessee also produced affidavits of certain other parties, who resiled from their earlier statements made before the I.T. Inspector and supported the assessee's contention that they had taken ornaments on approval. The ITO did not examine these parties, but in view of their earlier statements before the I.T. Inspector, he did not accept the affidavits of the said witnesses. However, the ITO came to the conclusion that most of the entries in the note book were reflected in the account books of the assessee and thus all the transactions were not kept outside the books of account of the assessee. The entries in the note book were for a period of about three months at the end of the accounting year and the total of such entries was about Rs. 45,000. The ITO, therefore, came to the conclusion that Rs. 45,000 had been invested by the assessee in purchase and sale of gold ornaments and as the nature and source of this investment was not satisfactorily explained, the amount of Rs. 45,000 was treated as the assessee's income from undisclosed sources. The total income was thereafter computed at Rs. 74,660.

2. The assessee filed an appeal. The AAC set aside the assessment taking into consideration that the affidavits filed by the assessee of different customers were rejected without examining them, and the treatment of the entire sale as the assessee's income did not appear to be correct. The ITO was, therefore, directed to make fresh assessment according to law.

3. During the course of fresh assessment proceedings, the assessee produced only Banarsi Dass, who supported the assessee. His statement was not accepted by the ITO. Another customer, Girdhari Lal, was not produced. However, his affidavit supporting the case of the assessee was on the record. This was also not believed as there was an earlier statement made by him before the I.T. Inspector against the assessee. Similarly, Bansi Ram Bhandari affidavit was also disbelieved. The assessee also relied on the statements of Inderjit Vakil, Sudarshan Singh Bhandari and Gurnam Singh, but their statements were not accepted by the ITO. The ITO held that in each of these cases, the customers had actually purchased ornaments from the assessee. The ITO in the reassessment proceedings came to the conclusion that the quantum of sales kept outside the books of account was Rs. 2 lakhs out of which the income of the assessee was Rs. 16,000. Another amount of Rs. 15,000 was treated as the assessee's income from other sources. Thus, the ITO estimated the profit on sales outside the books of account at 8 per cent. and made an addition of Rs. 16,000 as profit kept outside the books of account. The total income was thereafter computed at Rs. 60,660.

4. The assessee filed an appeal before the AAC, who sustained an addition of Rs. 8,000 only. No further appeal was filed by the assessee before the Tribunal.

5. Penalty proceedings for concealment of income were initiated at the time of completing, the original assessment. On the basis of the material on the record, the IAC held that the assessee had done the business of purchase and sale of gold ornaments outside the books of account and Rs. 31,000 was the concealed income of the assessee and a penalty for the said amount was imposed. This penalty was imposed before the order was passed by the AAC in the appeal filed against the order passed by the ITO in pursuance of the remand. Consequently, in view of the relief given in the quantum appeal, the penalty was reduced to Rs. 8,000.

6. The assessee appealed before the Income-tax Appellate Tribunal (Chandigarh Bench) (hereinafter referred to as 'the Tribunal') that the penalty was not exigible. The Tribunal partly allowed the appeal. At the instance of the assessee, the following questions of law have been referred to this court for its opinion :

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that even though the original assessment order dated March 30, 1972, had been set aside by the Appellate Assistant Commissioner, the satisfaction recorded by the Income-tax Officer in that order survived and penalty could be levied on the basis of the satisfaction after the completion afresh of the assessment ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the Income-tax Officer's letter dated March 14, 1974, referring the case to the Inspecting Assistant Commissioner under Section 274(2) after completing fresh assessment was only a superfluity ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding penalty of Rs. 4,500 on the additional profit estimated on estimated sales outside the books of account ?'

7. As regards questions Nos. 1 and 2, the learned counsel for the assessee has fairly conceded before us that both these questions have to be answered in favour of the revenue and against the assessee, in the affirmative. We order accordingly.

8. As regards question No. 3, it may be observed that admittedly no material was placed before the authorities by the revenue in the penalty proceedings. It is no doubt true that the explanation put forth by the assessees that the entries in the note book pertained to the transactions, by which the ornaments were advanced to the customers for trial, was not accepted by the authorities, but that by itself would not entitle the imposition of penalty. The onus was on the revenue to establish that the assessee was guilty of concealing the particulars of his income. Merely because the explanation put forth by the assessee has been found to be false, it would not follow that the penalty was exigible. Mr. Awasthy relies on the Explanation to Section 271(1)(c) of the Act. This court in Addl. CIT v. Jiwan Lal Shah : [1977]109ITR474(All) , 483, observed as follows:

'In the instant case the mere fact that the explanation given by the assessee in respect of the bank deposits was not accepted does not necessarily lead to the conclusion that the said deposits were concealed incomes or that the assessee furnished inaccurate particulars of his income. The nature of penalty proceedings as quasi-criminal has not undergone any change by the addition of the Explanation to Section 271(1). It merely affects the onus of proof and does nothing more than that. We find that our view is supported by a decision of the Punjab and Haryana High Court in Additional Commissioner of Income-tax v. Karnail Singh V. Kaleran .'

9. We are in respectful agreement with the above mentioned observations. Similarly, this court in a Bench decision in CIT v. Bharat Tubewell Stores (I.T. Ref. No. 76 of 1974, decided on September 4, 1979) [1981] 132 ITR 241, after an elaborate discussion of the various authorities on the subject, came to a similar conclusion as we have arrived at in this case. We, therefore, following the decision of our own court in Karnail Singh's case , Jiwan Lal Shah's case : [1977]109ITR474(All) and Bhamt Tubewell Store's case, hold that in the facts and in the circumstances of this case, the penalty was not exigible. Question No. 3 is, therefore, answered in the negative, i.e., in favour of the assessee and against the revenue. We order accordingly. There will be no order as to costs.


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