Delhi High Court
Commissioner Of Income-Tax Delhi-V vs R. Dalmia (Decd.) on 11 January, 1980
Equivalent citations: [1981]128ITR399(DELHI)
JUDGMENT Avadh Behari Rohatgi, J.
1. These are two petitioners by the revenue under S. 256(2) of the I.T. Act, 1961 ("the Act"), for an order directing the Income-tax Appellate Tribunal to state a case to this court and to refer certain questions of law formulated by the revenue arising out of the order dated March 24, 1975, of the Tribunal. At the conclusion of the hearing on January 4, 1980, we announced our decision. We dismissed the applications. Now, we give our reasons.
2. The Tribunal by order dated February 13, 1976, held that no question of law arose and the findings in question were essentially findings of fact. The Tribunal rejected the applications made to it under S. 256(1) of the Act. Hence these petitions to this court.
3. The respondent, late Shri R. Dalmia, was the assessed. In the assessment year 1954-55, Rs. 14 lakhs were added to his income from undisclosed sources because he could not explain to the satisfaction of the revenue authorities the origin of a cash credit of a corresponding amount in his name in the books of Bharat Union Agency Ltd., a concern under his control. This addition was finally upheld by the Tribunal.
4. As a sequel a penalty of Rs. 12 lakhs was imposed on the assessed by the revenue authorities on the charge of having concealed his income to the extent of Rs. 14 lakhs for the assessment year 1954-55. The Tribunal by order dated March 24, 1975, cancelled the penalty. They took the view that the charge of concealment of income had remained unproved.
5. The assessed gave an explanation that at the relevant time he was in possession of three A class preference shares of Bennett Coleman and Company Ltd., that these shares of the face value of Rs. 1 lakh each had a substantially higher market value, that these shares were sold by him on May 3, 1953, to Jaipur Traders Ltd. for an aggregate sum of Rs. 14,02,018-12-0. He further explained that Jaipur Traders paid him in cash Rs. 2,018-12-0 on May 6, 1953, and the balance of Rs. 14 lakhs was paid in cash to Bharat Union Agency on the same date. This was his explanation of the deposit of Rs. 14 lakhs in his name in the books of Bharat Union Agency Ltd. The revenue did not accept this explanation. The authorities found it to be false. They added Rs. 14 lakhs as the undisclosed income of the assessed.
6. Now, it is a straightforward case of unacceptability or falsity of the explanation given by the assessed. In the leading decision of CIT v. Anwar Ali [1970] 76 ITR 696, the Supreme Court laid down the principle that before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessed had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. The court said (p. 701) :
"If there is no evidence on the record except the explanation given by the assessed, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income."
And "It would be perfectly legitimate to say that the mere fact that the explanation of the assessed is false does not necessarily give rise to the inference that the disputed amount represents income."
7. In our opinion, the revenue has failed to establish that the assessed had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars.
8. Counsel for the revenue referred us to D. M. Manasvi v. CIT . He contended that the assessed had deliberately adopted a device for the purpose of concealing his income. He argued that this was not a case of inference from mere falsity of the explanation given by the assessed in the assessment proceedings. We do not agree. It appears to us to be a clear case of falsity of explanation. It is not a case where there is a definite finding, as was the case in Manasvi that a device had been deliberately adopted by the assessed for the purpose of concealing his income. In our opinion, Anwar Ali's case ought to be followed here, as was actually done, D. M. Manasvi v. CIT has no application.
9. A penalty was also imposed on the assessed under s. 273(a) on the ground that the assessed had filed his advance tax estimate knowing it or believing it to be untrue. It is not disputed before us that this second penalty was consequential. As the assessed could not anticipate the addition of Rs. 14 lakhs to his income he could not file an advance tax estimate in conformity with the requirements of law. It cannot, therefore, be said that he filed his advance tax estimate knowing it or believing it to be untrue.
10. In our opinion, the Tribunal was right in refusing to refer the questions raised by the revenue to this court as no questions of law arose. The applications are, therefore, dismissed.