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Polo Singh and Co. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberIncome-tax Case No. 2 of 1972
Judge
Reported in[1975]98ITR564(Delhi)
ActsIncome Tax Act, 1961 - Sections 256 and 271(1)
AppellantPolo Singh and Co.
RespondentCommissioner of Income-tax
Appellant Advocate Daljit Singh, Adv
Respondent Advocate R.H. Dhebar, Adv.
Cases ReferredDurga Timber Works v. Commissioner of Income
Excerpt:
.....271 (1) of income tax act, 1961 - tribunal reduced income returned by assessed - amount included cash credit shown by assessed in his books of accounts - tribunal stated that amount represented concealed income of assessed - penalty livable under section 271 (1) (c) - tribunal declined to refer case before court as decision based on facts and no question of law arose out of order - assessed prayed before court to decide on issue - tribunal rightly concluded that amount represented concealed income of assessed - decision based upon finding of facts - no question of law arose out of order of tribunal - application dismissed. - - 4. in the assessment proceedings, the assessed had failed to offer any explanationn at all in respect of the cash credit of rs. it is no doubt open to the..........rs. 51,287. the said amount included a sum of rs. 3,500 which was shown in the assessed's books as cash credit. the assessed could not prove this cash credit and, ultimately, surrendered this amount for being included in its income. after completing the assessment, the income-tax officer initiated penalty proceedings against the assessed for concealment of income to the extent of rs. 3,500 represented by this cash credit which had been surrendered by the assessed for the purpose of being included in its income. the income-tax officer referred 'the penalty proceedings to the inspecting assistant commissioner of income-tax as, according to him, the penalty which was livable was more than rs. 1,000. before the inspecting assistant commissioner, the assessed contended that this cash credit.....
Judgment:

Ansari, J.

1. M/s. Polo Singh & Company (hereinafter referred to as 'the assessed'), has filed the present application under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), with the prayer that the Income-tax Appellate Tribunal, Delhi Bench (hereinafter referred to as 'the Tribunal '), be directed to refer the following question to this court :

' Whether, on the facts and in the circumstances of the case, the levy of penalty under Section 271(1)(c) of the Income-tax Act is justified '

2. For the assessment year 1963-64, the assessed returned an income of Rs. 18,861. The assessed's books of account were not accepted and the assessment was completed by the Income-tax Officer on an income of Rs. 78,700 which was ultimately reduced by the Tribunal to Rs. 51,287. The said amount included a sum of Rs. 3,500 which was shown in the assessed's books as cash credit. The assessed could not prove this cash credit and, ultimately, surrendered this amount for being included in its income. After completing the assessment, the Income-tax Officer initiated penalty proceedings against the assessed for concealment of income to the extent of Rs. 3,500 represented by this cash credit which had been surrendered by the assessed for the purpose of being included in its income. The Income-tax Officer referred 'the penalty proceedings to the Inspecting Assistant Commissioner of Income-tax as, according to him, the penalty which was livable was more than Rs. 1,000. Before the Inspecting Assistant Commissioner, the assessed contended that this cash credit of Rs. 3,500 did not represent the income of the assessed and that it was a genuine cash credit. In support of this contention, the assessed filed an affidavit of one of the partners of the firm to the effect that this amount had been advanced by him to the firm. The Inspecting Assistant Commissioner did not accept the contention of the assessed or the affidavit filed in support of it and held that the amount of Rs. 3,500 represented the concealed income of the assessed. He, thereforee, levied a penalty of Rs. 8,000 against the assessed. The assessed filed an appeal before the Tribunal against the order of the Inspecting Assistant Commissioner levying penalty and contended that the Inspecting Assistant Commissioner was not justified in rejecting the Explanationn offered by the assessed or the evidence adduced in support of it in respect of the cash credit of Rs. 3,500. The Tribunal, however, agreed with the view of the Inspecting Assistant Commissioner that the amount of Rs. 3,500 represented the concealed income of the assessed and that a penalty was livable under Section 271(1)(c) of the Act. The Tribunal, however, reduced the penalty to the minimum which was livable under the Act. The assessed then filed an application before the Tribunal under Section 256(1) of the Act requiring the Tribunal to refer the following two questions to this court:

' 1. Whether, on the facts and in the circumstances of the case, the penalty order is in contravention of the provisions of Sections 274 and 275 of the Income-tax Act, 1961 ?

2. Whether, on the facts and in the circumstances of the case, the levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961, is justified?'

3. The Tribunal declined to refer either of these questions as, in its view, the decision of the Tribunal was based upon an appreciation of factsand no question of law arose out of the order of the Tribunal, In its present application under Section 256(2) of the Act, the assessed has restricted its prayer for referring only one of the two questions, which has already been stated supra.

4. In the assessment proceedings, the assessed had failed to offer any Explanationn at all in respect of the cash credit of Rs. 3,500 and had surrendered this amount to be included in its income. In other words, the assessed had agreed that this amount may be treated as its income which was kept outside its books of account. This would amount to a concession by the assessed that the amount of Rs. 3,500 was its concealed income. But, in the penalty proceedings, the assessed went back upon its concession and attempted to offer an Explanationn for the cash credit of Rs. 3,500 and also produced an affidavit of one of the partners in support of this Explanationn. It is no doubt open to the assessed to prove in the penalty proceedings that the cash credit was a genuine one even though it had failed to prove the genuineness of the cash credit in the assessment proceedings. It is then the duty of the Income-tax Officer or the Inspecting Assistant Commissioner, as the case may be, to consider this evidence in the penalty proceedings. In the present case, the Inspecting Assistant Commissioner has in fact considered the evidence produced by the assessed in proof of the genuineness of the cash credit of Rs. 3,500 and after such consideration, he has rejected the evidence. The Tribunal also has considered the said evidence and has also rejected it. The finding of the Tribunal that the cash credit of Rs. 3,500 was not a genuine cash credit and that it represented the concealed income of the assessed is a finding of fact.

5. The learned counsel for the assessed contends that even if the Tribunal has given a finding that the Explanationn offered by the assessed in proof of the cash credit was false or unacceptable, such a finding by itself did not justify the levy of penalty and that it was further necessary for the revenue to prove by positive evidence that the unproved cash credit represented the real income of the assessed. In support of this contention, he seeks to rely upon a decision of the Allahabad High Court in Commissioner of Income-tax v. Banarsi Shah Charan Singh, [1972] 86 ITR 491 , in which it was held that:

' The mere rejection of an Explanationn given by the assessed in respect of cash credit entries found in its account books will not justify the application of Section 28(1)(c) of the Indian Income-tax Act, 1922, and the consequent imposition of penalty. Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed entries represent income and that the assessed has consciouslyconcealed the particulars of his income or has deliberately furnished inaccurate particulars. '

6. The Allahabad High Court has merely reproduced the observations of the. Supreme Court in Commissioner of Income-tax v. Anwar Ali, : [1970]76ITR696(SC) . A Division Bench of this court in Durga Timber Works v. Commissioner of Income-tax : [1971]79ITR63(Delhi) . interpreted the decision of the Supreme Court in Anwar Ali's case in the following terms :

' It will, however, be seen that what has been said by their Lordships is that the finding given in the assessment proceedings being for the purpose of determining or computing the tax is not conclusive, but the finding is none the less good evidence. It is true that mere falsity of the assessed's Explanationn is not sufficient to justify the imposition of penalty for when the assessed is called upon to show cause why penalty should not be imposed on him he may adduce evidence which he could not produce earlier or he may explain to the satisfaction of the authority dealing with the penalty proceedings that the disputed amount was a receipt of some other kind and not a revenue receipt and was, thereforee, not taxable. '

7. With regard to the burden of proof in such cases, it was observed that :

' Under the circumstances, it would amount to laying an impossible burden of proof of the department and making the provisions for imposition of penalty wholly unworkable, if one were to insist that the department should still be called upon to prove by independent evidence that the assessed had concealed its income or that the amounts were not revenue receipts.'

8. We are in respectful agreement with the interpretation put by the Division Bench of this court on the rule laid down by the Supreme Court in Anway Ali's case.

9. In the present case, the Tribunal has considered all the circumstances relating to the cash credit of Rs. 3,500 and the Tribunal was satisfied that the revenue was able to prove that the amount of Rs. 3,500 was the concealed income of the assessed. As already stated, this is a finding of fact and no question of law arises out of the order of the Tribunal. The application is thereforee, dismissed. There shall, however, be no order as to costs,


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