Income Tax Appellate Tribunal - Nagpur
Income-Tax Officer vs Manoharlal M. Agrawal. on 15 February, 1989
Equivalent citations: [1989]30ITD151(NAG)
ORDER
1. These seven appeals though they relate to different assesses, involve more or less a common question. They are therefore, disposed by this single order.
2. In appeal No. 84 (Nag) /86, original assessment was made under s ection 143(1) on 26-2-1982 on a total income of Rs. 15,720. This assessment was reopened under section 143(2) (b) and during these proceeding the assessee filed a revised return disclosing an additional income of Rs. 15,000. This was accepted by the ITO who further initiated penalty proceeding under section 271(1) (c) of the IT Act in response to which the assessee contention was that the assessee had surrendered this amount towards his household expenses in order to buy peace with the Departmental and, therefore, no penalty should be levied. The ITO however, rejected this explanation and levied a penalty of Rs. 6,000. This had been deleted by the AAC on the ground that in this case the assessee had offered the amount to tax with an express condition that it will not attract any penalty and that there was no admission that this was the income of the assessee. Moreover, this was not a case of reopening under section 147 at all. Therefore, there could be no inference that there was concealment. The Department has come up in the second appeal before the Tribunal.
3. In ITA no. 86(Nag) /86 a similar additional of Rs. 8,000 on account of extra household expenditure was made by the ITO on the assessee filing a revised return on 23-3-1984. Of course in this case the assessee that not been completed in the first instance but otherwise the facts are same. The ITO levied a penalty on the basis of assessee admission of extra income and the AAC similarly deleted the penalty because according to him, the ITO had not rebutted the explanation of the assessee that the revised return had been filed without any material in the possession of the ITO about the household expenses. The Department of the ITO about the household expenses. The department is in appeal before the tribunal in this case.
4. In ITA No. 87 (Nag) /86 again the facts are similar. The return was filed at Rs. 23,910. Thereafter the additional income of Rs. 8,000 was shown in the respect of cash represented by demand draft sent by the assessee to Bombay. The source of the cash was stated to be gift received at the time of marriages of Shri Madhusudan Agrawal and Shri Rajendrakumar Agrawal. However, the receipt of such gift was not substantiated. Another Rs. 8,000 was surrendered in the revised return on account of additional household expenses. The ITO initiated penalty proceeding and levied penalty of Rs. 8,800. This penalty has been again been deleted by the AAC on more or less similar reasoning that an explanation was offered for the amount shown as income in the revised returns. The ITO had nowhere given a finding that the explanation was false or there was deliberate mis-representation. There were affidavits from the relatives, confirmatory letter from father-in-law of Rajendrakumar. Thus the assessee had discharged his onus and it was for the ITO to prove that these explanations were false. According to the AAC, it appeared to him that the assessee disclosed the income of Rs. 16,000 in the revised return only on some assurance from the ITO regarding non-levy of penalty. He accordingly deleted the penalty and the Revenue is again in appeal.
5. In ITA No. 102(Nag) /86 the assessment was originally completed on a total income of Rs. 27,200. Thereafter the assessment proceedings were reopened u/s 143(2) (b) after obtaining approval from the IAC the reason for which was search and seizure operation carried in the business and residential premises of the assessee. Thereforeupon the assessee filed a revised return disclosing an additional income of Rs. 8,000. Besides that in the revised return the assessee did not disclose the income from house property situated at Bikaner. A sum of Rs. 2,500 was added on this account of low withdrawals was to buy peace and the income from house was not added because the title to the said property was in dispute in a Civil Court which was only decided in 1982 in favour of the assessee. Still the matter was not final and it was pending in the Rajasthan High Court. The ITO rejected both the explanations and levied a penalty of Rs. 7,000 holding that Rs. 10,500 have been concealsed. The appeal of the assessee in this case was dismissed by the AAC. Consequently the assessee has come up in second appeal before the Tribunal.
6. In ITA No. 103 (Nag) /86 the return of income was originally filed at Rs. 27,440 and assessment was also completed u/s 143(1) at this figure. Thereafter additional income of Rs. 8,000 under the head "income from other sources" was declared and on this additional income a penalty of Rs. 4,122 has been levied. This has been confirmed by the AAC and consequently the assessee is in appeal.
7. In ITA No. 106(Nag) /86 the facts are that on a search operation it was found that the assesse, a minor, had purchased FDR of Rs. 50,000. The sourcess were sought to be explained, in section 132(5) proceedings. Though they were explained, the assessee offered Rs. 25,000 for taxation only in order to purchase peace. The ITO initiated penalty proceedings and ultimately came to the conclusion that the assessee had concealed his income within the meaning of Explanation (3) to section 271(1) (c). He, therefore, levied a penalty of Rs. 7000. This has been confirmed by the AAC and the assessee has consequently come up in second appeal before the Tribunal.
8. In ITA No. 106 (Nag) /86 the original assessment was completed on 30-11- 1981. Later a revised return was filed disclosing an additional income at Rs. 3,250 under the head "income from house property" and Rs. 10,000 under the head "income from other sources". Penalty proceedings were similarly initiated in response to which the assessees explanation was that regarding the house property the reply should be considered to be the same as in 1979-80. The assessee along with one Shivratan had purchased FDR for Rs. 50,000 in October, 1979 in which assessees share was Rs. 25,000. The source of the FDR with supporting evidence had been explained in 132(5) proceedings. However, by way of concession the assessee had offered to the tax of Rs. 10,000. Interest on FDR was below taxable limit. The ITO, however, was of the opinion that the assessee had failed to disclose the income from house property in the original return and this amounted to Rs. 3,250. Similarly the assessee had accepted to have failed to return the income of Rs. 10,000 on account of investment in the FDR. He accordingly levied a penalty of Rs. 6,167. This has again been confirmed by the AAC and the assessee has come up in second appeal.
9. I have heard the representatives of the parties at length in all these matters. In order to appreciate the merits, it is necessary to give a brief history of the case. The pedigree table of the assessees family is as under :
Mulchandji Shivkisan Madhusudan Manoharlal (Appeal Nos. 87 & married in 1981 to (Appeal No. 84 103) Manjula and 102) (Appeal No. 86) =Jamnadevi =Sumitra (not residing Rajendra Sushikumar Kamalkumar here from married in (14 years (minor Diwali, 1980). 1982 minor) 8 years) Premlata Munna Anand Pankaj. (Appeal No. (Appeal No. 106) 104) As stated above, some of the assessments had already been completed and some were pending when search and seizure operations were carried on the business and residence of the members of the assessee family on 10th, 11th and 12th November, 1983. Notice u/s 112A read with section 132(5) was served upon Shri. Shivkisan Mulchand and Rajendrakumar Shivkisan on 30-11- 1983. In these proceedings several assets were discovered. For example, jewellery worth Rs. 36,600 was explained to belong to the HUF Rajendrakumar for which there was apparently no source of acquisition. One FDR of Rs. 50,000 in the joint name of Rajendrakumar Shivkisan and Shivratan Mulchand pruchased on 9-10-1979 was found. One FDR of Rs. 25,000 purchased by Rajendrakumar Shivkisan on 9-6-1983 was found. One FDR of Rs. 10,000 in the name of Ku. Komal kaughter of Rajendrakumar was found. After considering the relevant explanation, the ITO was of the opinion that the amounts of Rs. 50,000, Rs. 25,000 and Rs. 10,000 representing the FDRs were the assessees income from undisclosed sources in the years 1980-81, 1984-85 and 1984-85 (sic) respectively. One Premier Padmini Car purchased from Jaipur on 30-4-1982 was also noticed. It was stated that Prabhatilal had taken Rs. 50,000 from Rajendrakumar and the remaining amount was adjusted by him by gift received at the time of Kanyadan at the time of marriage. The sum of Rs. 50,000 invested in the purchase of the car was treated as this assessees income from undisclosed sources. The ITO also noticed in detail in the case of Shri Shivkisan that the standard of living of both the assessees was very high. The family owned Austin Car No. MFD 9516. Beside that it owned one Premier Padmini Car and two scooters. Two of the bed-rooms of the family were air conditioned. One projector television was also found on search. Therefore, additional income of Rs. 20,000 Rs. 20,000, Rs. 25,000 and Rs. 25000 was taken as income from undisclosed sources of Shri Shivkisan Mulchand. Similarly, additions of Rs. 15,000, Rs. 15,000, Rs. 20,000 and Rs. 25,000 were made in case of Shri Rajendrakumar Shivkisan. In case of Shivkisan Mulchand, a cash of Rs. 3 lakhs was found in the assessees locker in the State Bank of India. The said sum was also taken as assessees income from undisclosed sources. Similarly, a sum of Rs. 1,59,688 was taken as income of Shivkisan Mulchand on account of unexplained investment in gold ornaments and silver utensils. Further there was no explanation in respect of a draft of Rs. 50,000 sent to Bombay in his case. Because of these observations in the order under section 132(5), the various assessees filed revised returns including additional incomes as mentioned above along with identical letters in the following terms :
"The income as returned by the assessee as per original return and as assessed under section 143(1) is the correct income of assessee and the same does not need any revision. However, by way of abundant caution and to avoid controversy the assessee submits as under :
2. The assessee and other members of his family who are all assessees are staying together and are pulling their resources together and are also incurring household expenditure, expenses on marriages in the family if any and other expenses of similar nature together. All these expenses are incurred out of the withdrawals by the family members from the firms in which they are partners and such withdrawals taken together are sufficient to meet the above referred expenditure.
3. However to avoid any subjective controversy or difference of opinion between the group of assessees and the department, the assessee above named and other members of the family are offering certain amounts for assessment purpose only for assessment years 1981-82 and 1982-83 to cover up the deficiency, if any, regarding the withdrawals for household expenditure, marriage expenses etc. and any unnoticed deficiency.
10. The only question that now remains for my consideration is as to whether in the present circumstances the onus of proving that the assessees were guilty of concealment was upon the revenue. The representative of the assessee has referred some authorities for the proposition that no penalty should be levied in these circumstances. For example, he has quoted CIT v. Prafulla Kumar Mallik [1976] 104 ITR 648 (Ori.). That however, was a case of unexplained cash credit and the transactions related to a very old period. The creditors could not be traced and even from the assessees petition it could not be spelt that the assessees own money had been introduced in the name of fictitious creditors. The Tribunal had also held that the Income-tax Officer had made no exercise either of diligence or acumen or had any source of information that the hundi loans were concealed income of the assessee. This case, therefore, does not very much help the assessee. Another case quoted was Badshah Prasad v. CIT [1981] 127 ITR 601 (Pat.) In this case the revised returns were filed by the assessee before any detection by the Department and all the returns were based on the payment certificates issued by the authorities for whom the assessee, a contractor, had executed the contract, so that the revised returns were obviously not on account of any investigation by the Department. Yet another case quoted was CIT v. V. R. Chittal Achi [1983] 140 ITR 698 (Mad.). In that case the assessee had explained that sum of Rs. 40,000 had been obtained by way of Stridhan in 1944 and other amounts were received by her out of funds realised by her from Burma, Ceylon etc. Considering these explanations, the Tribunal had found as a matter of fact that moneys to the extent of at least Rs. 58,750 were explained and restricted the addition to Rs. 20,400. The Tribunal had further found that there was no gross or wilful neglect on the part of the assessee even though her estimate regarding sources available was not accepted by the Department. It was for this reason that the Tribunal cancelled the penalty and the High Court did not choose to interfere. The last authority quoted was CIT v. Pradeep Shantaram Padgaonkar [1983] 143 ITR 785 (MP). In this case the assessee had actually produced certificates regarding gifts alleged to have been made to him and those certificates had not been considered while levying the penalty. Therefore, the penalty was deleted.
11. As against these authorities there were voluminous authorities to support the view that the levy of penalty in the present case was proper. For example, in Durga Timber Works v. CIT [1971] 79 ITR 63 (Delhi) penalty was upheld when cash credits were admitted by the assessee not to be genuine though they had been introduced in the name of third person. Again in Mahavir Metal Works v. CIT [1973] 92 ITR 513 (Punj. & Har.) it was held that where the assessee had himself during the course of assessment proceedings filed a revised return and owned a disputed amount to be his income, the onus on the department stood discharged. In that situation it was for the assessee to prove in the penalty proceedings that the admission made by him in the assessment proceedings was wrong or incorrect.
12. In F. C. Agarwal v. CIT [1976] 102 ITR 408 (Gauhati) penalty was maintained upon an assessee because he had not been able to discharge the onus that the difference between the returned and the assessed income was not due to gross or wilful neglect on his part.
13. Similarly, in CIT v. J. K. A. Subramania Chettiar [1977] 110 ITR 602 (Mad.) it was held that the fact that the assessee furnished true particulars of his income before any detection is foreign to the scope of section 271(1) (c) and the order of the Tribunal cancelling the penalty on the ground that the assessee had discovered a mistake in his return and rectified the same before detection, was quashed by their Lordships. Similarly, in Addl. CIT v. Radhey Shyam [1980] 123 ITR 125 (All.), the High Court clearly held that the benefit of a revised return cannot be claimed by an assessee if the original return does not contain the true particulars of his income. Again in Kumar Jagadish Chandra Sinha v. CIT [1982] 137 ITR 722 (Cal.), it was held that the offence of concealment of income was complete when the original voluntary returns were filed and the revised return did not obliterate the offence.
14. Comint to the actual circumstances in CIT v. K. Mahim [1984] 149 ITR 737 (Ker.), the assessee had filed a revised return voluntarily because he knew that the department was carrying on some kind of investigation. It was held that filing of voluntary revised return in these circumstances would not exonerate the assessee from liability to penalty under section 271(1) (c) of the IT Act. The facts of this case are nearly on all fours with this case. 15. In Loknath Chowdhury v. CIT [1985] 155 ITR 291 the Calcutta High Court has held that where an addition was made to the income of an assessee as unexplained investment under section 69 of the Act, such addition should be deemed to be the income for the purpose of levy of penalty, though if the assessee was unable to prove any cash credit, the onus would still be upon the department to prove that the amount of cash credit was the income of the assessee. In other words, their lordships have drawn a distinction with an addition on account of unexplained cash credits and unexplained investment. The representative of the assessee contended that some of the additions in the present case were not under section 69 but under section 69A on the basis of estimate of household expenditure which could not form the basis of penalty. I am afraid, I am not inclined to accept this contention. Unexplained investment and unexplained household expenditure would stand on the same footing. In the present case the observations of the search party would show that the standard of living of the assessee was very high and the concession regarding extra household expenditure made by the assessee was not voluntary in the sense that there was no material for making that addition.
16. More or less similar were the circumstances in Badri Prasad Om Prakash v. CIT [1987] 163 ITR 440 (Raj.). In that case the Income-tax Officer had examined the accounts of the assessee and found that the assessee had claimed full deduction in respect of bonus was admissible under the rules. Moreover some speculation losses were added in the return. The assessee thereupon filed a revised return enhancing the income in the light of the detection by the ITO. Penalty proceedings were initiated and penalty was levied. The High Court refused to interfere.
17. Lastly I may refer to a recent judgment of the Allahabad High Court in Biland Ram Hargan Dass v. CIT [1988] 171 ITR 390. In this case originally the assessee filed a return showing an income of Rs. 66,787. Thereafter the revised return declaring an income of Rs. 2,18,810 was filed in consequence of the seacrh conducted in the business premises of the assessee after the filing of the original return. The penalty for the extra income was upheld by the Tribunal and on a reference the High Court at page 394 referred to the present Explanation 1 to section 271(1) (c) which reads as under :
"Explanation 1 : Where in respect of any facts material to the computation of the total income of any person under this Act,-
(A) Such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purpose of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed :
Provided that nothing contained in this Explanation shall apply to a case referred to in clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him".
Their lordships held that clause (B) of this Explanation was clearly applicable. It needs be pointed out that most of the authorities discussed above related to earlier years when this Explanation was not on the statute book. This case related to the year 1978-79 and the present cases relate to the years 1980-81 and thereafter. So that the law applicable to these cases is the same as was applied in Biland Ram Hargan Dass case (supra).
18. Some effort was made by Rajendrakumar to explain the source of investment by reference to his agricultural income in some of the years. But a perusal of assessments of this assessee for the years 1983-84 and 1984-85 would show that again this very income was sought to be used for explaining the extra investment in those years. I am, therefore, not inclined to attach any importance to the explanation of the assessee that the source in the present case was agricultural income when the assessee admitted that the amount may be brought to tax in this year and sought to use the supposed agricultural income for explaining an investment made in a later year.
19. For the detailed reasons given above, I am of the opinion that penalties in the present case were clearly exigible. However, since it is a case of levy of penalty on the basis of admission by the assessees and in some case the Income-tax Officer has himself levied the minimum penalty, I order that in all cases the minimum penalties leviable shall be levied.
20. In the result the assessees appeals are dismissed and the departmental appeals are allowed subject to the qualification that the penalties in all cases shall be reduced to the minimum leviable under the law.