1. These four tax cases arise out of the orders passed by the Income-tax Appellate Tribunal, Madras, in four appeals filed by two assesses, one A. Abbas and his brother, A. Abdul Khader, both of whom happened to be partners in a business firm for two assessment years. On July, 12, 1967, the Enforcement Directorate conducted a search of the business premises of the firm in which the said two assesses were partners. During the said search, a sale deed dated, July 14, 1966, relating to premises No. 29, Motilal Street, T. Nagar, in favour of the wives of the two assesses jointly for a consideration of Rs. 41,900 was seized. The said document showed that the stamp papers to the value of Rs. 4,100 had been used for that document. A similar sale deed dated May, 1, 1967, relating to premises No. 33, Sarojini Street, Madras, purchased for a consideration of Rs. 42,000 was also recovered from the premises along with a receipt dated April 11, 1967, issues by one Shri K. N. V. Narayanan to Shri Abbas, one of the assesses, which contained on the reverse certain details of the cost of the house, stamp and lawyer's feed, etc., writted in the assessee's own handwriting. There were certain receipts issued by the Madras State Housing Board to Abdul Khader, one of the assesses, and they were also recovered. On the same day, Abdul Khader, one of the assesses, who was present at the time of the search by the Enforcement Directorate, was examined. He gave a statement before the officers who made the search. In that statement he admitted that he had on the previous day paid Rs. 2,000 to a lady from Ceylon, who came to Madras. When questioned about the source of the purchase price paid in respect of Motilal Street property, he had stated that the sale price was paid from and out of loans raised four persons at the rate of Rs. 10,500 each and the said loans has not been discharged. As regards the property at 32, Sarojini Street, Madras, he has stated that the assesses have purchased the said house jointly in the names of their wives, that the value of the house was Rs. 68,000 excluding the stamp value of Rs. 4,000 and other expenses, that the cost of the property in all came to Rs. 72,910 and that for this purpose the wives had provided a sum of Rs. 36,000 each by raising loans and by selling jewels.
2. Later, on June 20, 1968, the assessees filed their income-tax returns in respect of the two assessment years 1967-68 and 1068-69 and the income returned by Abbas was Rs. 5,898 and Rs. 4,155 respectively for the years 1967-68 and 1968-69. The return filed by Abdul Khader disclosed the very same figures as the income for the two years. On the same day, the ITO has noted in the order sheet that the representative for both the assesses was present, that the assessment for the assessment year 1966-67 was still pending, that enquires were to be made into the investments in Motilal Street property and Sarojini Street property and also in the Housing Board and that the assesses representative sought for further time for making further representations. However, it is seen that from the letter given by the ITO on December 24, 1970, that the returns were filed by the assessee when all the documents seized from the business premises of the firm on July 12, 1967, were with ITO. Subsequently, on November 29, 1968, the representative of the assessee wrote to the ITO two letters, one about Motilal Street property and the other Sarojini Street property. It has been stated there in that the source of purchase price for Motilal Street property was moneys raised by loans of Rs. 15,000 from Ahamed Meeran Sahib, Rs. 10,000 from Khan Meeran Sahib and Rs. 12,000 by sale of house at Palayamkottai Murugan Kuruchi by the other assessee, Abdul Khader, and the balance from the savings of the two assesses. The payment to the Ceylon lady was explained as made out of the savings of Abdul Khader. Confirmatory letter from the lender, Shri Ahmed Meeran Sahib, for Rs. 15,000 and another confirmatory letter from the lender Shri Khan Meeran Sahib, for Rs. 10,000 were also produced, as seen from the records before the ITO. As regards Sarojini Street property, the purchase price was stated to be Rs. 46,000 inclusive of the stamp charges and the source was explained as money raised by sale of jewels and borrowals of Rs. 30,000 from six person whose names and addresses were furnished in the statement. It was also stated that the assessment had invested their savings in the earlier year also in the purchase of the property. Four confirmatory letters from four persons out of six lenders for a total loan of Rs. 24000 out of Rs. 30,000 had been produced. A letter for the sale of jewels was also produced before the ITO. Thereupon, certain discussions took place between the ITO and the representative of the assesses and the assesses filed their revised returns on June 13, 1969. In the revised return, A. Abbas returned a sum of Rs. 17,000 as income from others sources and the said sum of Rs. 17,000 comprised (1) improvements of building not explained and (2) other times-Rs. 14,500. Thus, the aggregate of income from undisclosed sources, property and business was Rs. 28,232 Abdul Khader also filed a revised return showing income from other sources of Rs. 29,518 and the aggregate income including from all sources at Rs. 27,674 (sic).
3. For the assessment year 1968-69, A. Abbas returned income from "Other sources" at Rs. 28,955, the total income in the revised return being Rs. 33,111 made up of income from other sources, income from business and income from property.
4. We are not concerned in these case with the figures of income furnished by the two assesses as income from property and business and we are only concerned with the income furnished by the assesses for each of the years as income from other sources. As regards the source of Rs. 46,000 invested in Motilal Street property, the authorised representative of the assesses seems to have agreed to addition of Rs. 29,000 and the ITO did not dispute the source about the balance amount even though the source put forward by the assessee on November 29, 1968, is quite contrary to the Enforcement Directorate's report. However, the ITO was satisfied in making an addition of Rs. 29,000 as undisclosed income of the firm and divided the same into two equal halves and took it as undisclosed income of the two assesses. Similarly, the ITO has made an addition of a sum of Rs. 2,500 in the assessment of each of the assessment "improvements to buildings not explained". Similarly, for the assessment year 1968-69, the authorised representative seems to have accepted the investment on the house at Sarojini Street as Rs. 72,910 as stated in the statement of one of the partners at the time of the search. Therefore, the ITO at the time of discussion seems to have accepted all the six loans to the aggregate sum of Rs. 30,000 as true. The ITO, however, did not accept the assesses case of sale of jewellery of their wives. Therefore, the balance of Rs. 42,910 was held as not explained. The authorised representative agreed for the said sum of Rs. 42,910 being treated as income from other sources. The ITO made two more additions, (1) a sum of Rs. 3,000 towards poor drawings, and (2) Rs. 2,563 towards undisclosed investment made in the State Housing Board. Thus, the ITO made an addition to the extent of Rs. 28,955 as undisclosed income from other sources in the assessments of both the assesses. Subsequently, the assesses have given confirmatory letters agreeing to the assessment proposed by the ITO, as indicated above.
5. After completion of the assessments on the basis of the revised returns and on the basis of the confirmatory letters given by the two assesses for the two years, a notice has been issued by the IAC under s. 271 of the I.T. Act, to show cause why penalty should not be levied on the assesses for both the years, on the basis that there has been willful non-disclosure of the income. The assesses filed their written explanations in these penalty proceedings. After consideration their written explanations and after hearing their representation, the IAC came to the conclusion that a sum of Rs. 15,500 representing unexplained income (utilised) for (purchase of) Motilal Street house property is an item of concealment for the assessment year 1967-68. He, however, held that the sum of Rs. 1,500 for poor drawings was not an item of concealment. For the assessment year 1968-69, the IAC left out of account Rs. 3,000 added by the ITO on account of poor drawings but held that a sum of Rs. 25,955 has been concealed by the assessee. According to the IAC, apart from the presumption contained the Explanation to s. 271(1)(c) there is clear material available in the case to prove concealment of income, to the extent indicated above. In that view, the IAC felt that s. 271(1)(c) of the I.T. Act, stood attracted and levied penalties of sums of Rs. 15,500 and Rs. 25,955.
6. The assessees took up the matter in appeal to the Income-tax Appellate Tribunal, Madras. Before the Tribunal the assesses contended that as the assessment was made on agreed basis, there is no warrant for invoking the provision of s. 271(1)(c) of the Act, that in any event the assesses having submitted their explanations intimating the sources from which the money was given for purchase of the two properties and the assesses having agreed to the assessment order only to purchase peace, the mere fact that certain income came to be assessed under the head "Other sources" without going into the truth or otherwise of the assesses' explanation, cannot be taken advantage of for levying penalty under s. 271(1)(c) of the Act.
7. The Tribunal accepted the assessee's case in its entirety so far as the assessment year 1967-68 in concerned. According to the Tribunal, there were no incriminating materials warranting a presumption of concealment for that year. Merely on the basis of the revised return and the resultant assessments, concealment cannot be inferred. However, the Tribunal held that the position is different for the assessment year 1968-69. Though the revised return and the subsequent assessment cannot be the sole basis for presuming concealment, there are other materials in that assessment year to prove concealment of income, though not to the extent found by the IAC. Though the Tribunal made note of the fact that in the original statement made by the assessee, Sarojini Street property was said to have been purchased only for Rs. 42,000, yet on the basis of the statement made by one of the assessee, the assessees' representative agreed for an assessment being made on Rs. 72,910 taking it to be the purchase value of the property. The assesses had explained the sources only to the extent of Rs. 30,000 and the assesses' case that the balance of the consideration came from the sale of jewels had not been accepted. The Tribunal was of the view that the ITO himself has not accepted the explanation given by the assesses as to the sale of the jewels. The Tribunal also noted that no explanation has been offered for the balance of Rs. 26,910 after deducting the sum of Rs. 30,000 said to have been borrowed from six persons and the sum of Rs. 16,000 said to have been obtained by the sale of jewels. No explanation has been offered before the ITO or before the IAC or at least in the grounds of appeal before the Tribunal. The Tribunal also made noted of the fact that the sum of Rs. 2,563 which was added, no explanation was given by the assessees. In view of the fact that no explanation has actually been given by the assesses for the balance of the sale consideration of Rs. 26,910, the levy of penalty was held justified to the said extent. In that view, the Tribunal while vacating the order levying penalty for 1967-68, sustained the levy of penalty to the extent of Rs. 5,455 for the year 1968-69, so far as one assessee, A. Abbas, is concerned and Rs. 2,563 so far as the other assessee, Abdul Khader, is concerned.
8. Aggrieved by the order of the Tribunal, the Revenue has come up before us after getting a reference of the following question of law :
"Whether, on the facts and in the circumstances of the case, where, in the course of assessment as assessee agrees to addition of certain income and on that agreement the related income is brought to charge, it amounts to concealed income so as to attract penalty ?
9. From the facts stated above, it will be seen that the Tribunal actually went into the question as to whether there was in fact concealment by the assesses in this case in respect of both the assessment years. The Tribunal after considering the various items which formed the subject-matter of assessment, found that for the assessment year 1967-68, there was no justification for holding that there was concealment as had been done by the IAC. But there was concealment in the subsequent year by the assesses though not to the extent held by the IAC. In view of the finding given by the final fact-finding authority, the Tribunal, on the question as to whether there was in fact any concealment and if so to what extent, it is not possible for this court to interfere with the said finding especially when there is no specific question before us challenging the factual finding on the ground that there is no material to support that finding. The Tribunal, after having held that for the year 1967-68 there is no concealment, proceeded to hold that is concealment mainly on the basis that even in the revised return for the assessment year 1968-69, assesses had failed to give an explanation either before the assessing authority or before the IAC or before the Tribunal. We find that so far as the balance of the consideration of Rs. 16,000 is concerned, the assessees' case that sum was a spill over from the previous year, which was put forward before the Tribunal, was not accepted. As regards, this assessment year, the Tribunal found that there are special circumstances, apart from the revised return and the resultant assessment on an agreed basis, to indicate that there was concealment. In view of the fact that the finding of the Tribunal is based in materials, the Tribunal's findings cannot be interfered with in this reference.
10. Learned counsel for the Revenue places reliance on the Explanation to s. 271(1)(c), and contends that on the facts of this case the onus is on the assessee to prove that there was no concealment at all and it is not for the Revenue to place materials to indicate that the assessee has in fact concealed the income. The Tribunal has in fact taken note of the Explanation to s. 271(1)(c) but it has merely stated that the said Explanation is of no assistance to the Department, so far as the first year 1967-68 is concerned. But, so far as the year 1968-69 is concerned, the Tribunal has held that there is sufficient material to show that there was willful neglect on the part of the assessee. We accept the finding of the Tribunal that there was no concealment in the year 1967-68, but there was concealment to a certain extent in the year 1968-69 on the materials available. However, we are not in a position to answer the question as the question does not truly reflect the dispute between the parties. The question as framed proceeds on the basis that wherever the assessee agrees to an addition being made to the income returned by him and on the basis of the agreement the related income has been brought to charge, it may not amount to concealment merely on the basis of the assessee's acceptance. As a matter of fact, the Tribunal in this case has not proceeded merely on the basis of the assessees' admission of certain amounts as his income. The Tribunal has in fact proceeded on the basis that though certain additions had been made on an agreed basis, it cannot be the sole ground for initiating proceedings under s. 271(1)(c) and it has decided the question of concealment on the materials available in this case. In our view, the question as framed does not appear to arise from the order of the Tribunal since the Tribunal itself has not proceeded only on the basis of the assessment which has been made on agreed basis. We have to, therefore, reframe the question to reflect the exact dispute between the parties in these cases and we reframe the question accordingly as follows :
"Whether, on the facts and in the circumstances of the case, the cancellation of penalty in the case of each of the assesses for the assessment year 1967-68 and part of the penalty for the year 1968-69 is justified ?"
11. Having regard to the above discussions, we have to answer the question as reframed in the affirmative and against the Revenue. The assesses will have their costs from the Revenue Counsel's fee Rs. 500 (one set).