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Commissioner of Income-tax Vs. Pioneer Engineer Syndicate - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Judge
Reported in[1991]188ITR287(Mad)
ActsIncome Tax Act, 1961 - Sections 256(2), 271(1) and 271(4A)
AppellantCommissioner of Income-tax;pioneer Engineer Syndicate
RespondentPioneer Engineer Syndicate;commissioner of Income-tax
Appellant AdvocateJ. Jayaraman, Adv.
Respondent AdvocateK.V. Prasad, Adv.
Excerpt:
- - having regard to the terms of the assessee's settlement petition to the commissioner which furnished the one and only basis for the penalty levied by the inspecting assistant commissioner, we are satisfied that the tribunal was right in holding that the petition, by itself, would furnish no evidence whatever of concealment of income. it was this penalty order which was sought to be challenged as bad in law......the sum of rs. 3,25,000 representing the peak credit in the hundi loan account. at the same time, penalty proceedings were also initiated against the assessee under section 271(1)(c) of the act on the basis that the assessee itself had offered the hundi loan peak credit as its taxable income. these proceedings were subsequently taken charge of by the inspecting assistant commissioner. however, he had to drop these proceedings since the assessment made by the income-tax officer, adding the peak credit of rs. 3,25,000, was subsequently set aside in appeal by the appellate assistant commissioner who directed the income-tax officer to recompute the undisclosed income in the hundi loan account. the income-tax officer implemented the remand order by making a reassessment in which, on further.....
Judgment:

Balasubramanyan, J.

1. At the instance of the Income-tax Department, the Tribunal has referred to us the following question of law2 :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the penalty of Rs. 23,686 levied under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 1964-65?'

2. The assessee is a firm of engineering contractors. It filed a return of income for the assessment year 1964-65. While the assessment proceedings were pending, the assessee filed with the Commissioner of Income-tax a petition under section 271(4A) of the Act under which it offered for assessment the peak credit in the accounts in which it had disclosed its borrowings from certain multani bankers. The peak credit worked out to Rs. 3,25,000. The assessee submitted that these loans from multani bankers were repaid during subsequent years. While reiterating that the hundi borrowings were genuine, it expressed surprise that the hundi bankers should have made statements before the Department that the hundis were only accommodation transactions. The assessee, nevertheless, offered the amount of Rs. 3,25,000 for assessment, the assessee submitted that no penalty need be levied on the basis of its offer of the peak credit for assessment purposes. The income-tax Officer completed the assessment by adding the sum of Rs. 3,25,000 representing the peak credit in the hundi loan account. At the same time, penalty proceedings were also initiated against the assessee under section 271(1)(c) of the Act on the basis that the assessee itself had offered the hundi loan peak credit as its taxable income. These proceedings were subsequently taken charge of by the Inspecting Assistant Commissioner. However, he had to drop these proceedings since the assessment made by the Income-tax Officer, adding the peak credit of Rs. 3,25,000, was subsequently set aside in appeal by the Appellate Assistant Commissioner who directed the Income-tax Officer to recompute the undisclosed income in the hundi loan account. The Income-tax Officer implemented the remand order by making a reassessment in which, on further consideration, he added only a sum of Rs. 96,434 as unproved hundi loan, as against Rs, 3,25,000, which he added under the same head in the original assessment. On the basis of this reassessment, the Inspecting Assistant Commissioner once again conducted penalty proceedings under sect5ion 271(1) (c) of the Act. Ultimately, the Inspecting Assistant Commissioner levied a penalty of Rs. 23,686. On appeal, the Tribunal accepted the contention of the assessee that its offer during the assessment proceedings to get taxed on the peak credit was only to buy peace with the Department and not on the basis of any admission that the hundi loan were not genuine. The Tribunal, held that the addition made on account of the unproved hundi loans, on an agreed basis, cannot be a ground for holding that the assessee was guilty of concealment of income. It, accordingly, cancelled the penalty levied by the Inspecting Assistant Commissioner.

3. The Department's contention before us is based on the question of law which we have earlier set out. The contention is that the assessee's offer for assessment must itself be regarded as sufficient justification for the levy of penalty. We do not agree with this submission. There may be cases where a finding of concealment may be supported by the assessee's own admission of guilt. This, however, is not such a case. It is true that the assessee did not produce evidence to support the case of the hundi loans being genuine. It is also true that the assessee was willing to get the assessment settled on the basis that the peak credit in that account represented its taxable income. This offer of assessment, by itself, cannot, how ever, amount o an admission that income had been concealed. On the contrary, even the petition by the assessee under section 271(4A) to the Commissioner made it quite clear that the hundi loans were genuine and the assessee's willingness to get assessed on the basis of the peak credit was only because it had become difficult for the assessee to prove the genuineness of the credits in view of the conditions created by the denial by the hundi bankers of their advances. Having regard to the terms of the assessee's settlement petition to the Commissioner which furnished the one and only basis for the penalty levied by the Inspecting Assistant Commissioner, we are satisfied that the Tribunal was right in holding that the petition, by itself, would furnish no evidence whatever of concealment of income. Our answer to the question of law propounded by the Department is, therefore, in the affirmative and in favour of the assessee.

4. Arising from the same proceedings, the assessee, for its part, had asked for a reference on the following questions of law :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in rejecting the contention of the assessee that the Inspecting Assistant Commissioner did not have any jurisdiction to levy the penalty after having dropped the penalty proceedings initiated originally?

2. Whether, on the facts, and in the circumstances of the case, the Tribunal was right in holding that the penalty was levied by the Inspecting Assistant Commissioner for concealment of income and not for furnishing inaccurate particulars of income?

3. If the answer to question No. 2 is in the negative, whether the Inspecting Assistant Commissioner was right in law in levying penalty for furnishing inaccurate particulars of income and whether the penalty proceedings were initiated for concealment of income?'

5. These questions arise out of a legal contention put forward by the assessee before the Tribunal which the Tribunal rejected. As already mentioned, the original assessment made by the Income-tax Officer, adding the peak credit of Rs. 3,25,000, was set aside and remanded by the Appellate Assistant Commissioner, and the assessments were redone by the Income-tax Officer pursuant to the remand order in which, instead of an addition of Rs. 3,25,000 to the income returned as in the original assessment, the Income-tax Officer went in for a lesser sum, namely, Rs. 96,434, as and towards the unproved hundi loans. Having regard to the fact that the assessment was set aside, the penalty proceedings which had been initiated on the foot of the original assessment were subsequently dropped. Fresh penalty proceedings were started, close upon the heels of the reassessment made by the Income-tax Officer by way of carrying out the remand order of the Appellate Assistant Commissioner. It was this penalty order which was sought to be challenged as bad in law. The Tribunal, however, sustained the validity of the penalty holding that the Inspecting Assistant Commissioner had jurisdiction to levy penalty arising out of the subsequent reassessment proceedings. The three questions of law which have been referred to us by the Tribunal, at the instance of the assessee, have a bearing on the validity of the penalty order based on the reassessment. They canvas different groups of invalidity. Since we have already held that the penalty cannot be levied under section 271(1)(c) for the reason that there is no evidence of concealment of income, it would be academic to enter into these questions referred by the Tribunal at the instance of the assessee. We, therefore, leave these three questions unanswered. There will be no order as to costs.


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