Madras High Court
Commissioner Of Income-Tax vs K.C. Palaniswamy on 21 January, 2006
Author: P.D. Dinakaran
Bench: P.D. Dinakaran, P.P.S. Janarthana Raja
JUDGMENT P.D. Dinakaran, J.
1. The above tax case appeals are directed against the common order of the Income-tax Appellate Tribunal in ITA. Nos. 975 & 947/Mds/1994, dated 12.11.2002.
2.1. The Revenue is the appellant. The assessment years involved are 1989-90 and 1990-91. The case of the appellant is that the assessee was a member of the Tamilnadu Assembly/Lok Sabha during the previous assessment years. The assessee was found to have unexplained income and the same was assessed to tax and separate penalty proceedings were also initiated by the assessing officer amounting to Rs. 17 lakhs for A.Y. 1989-90 and Rs. 4.5 lakhs for A.Y. 1990-91.
2.2. Aggrieved by the same, the assessee filed appeals before the Commissioner of Income-Tax (Appeals) against the order imposing penalty under Section 271(1)(C) of the Income Tax Act, 1961. The Commissioner of Income-Tax (Appeals), after an elaborate discussion, sustained certain additions made by the assessing officer, but cancelled the entire amount of penalty without sustaining even the penalty relatable to the quantum of addition sustained by him. The said findings of the Commissioner of Income-Tax (Appeals), were upheld by the appellate Tribunal on the appeals filed by the Revenue.
3. Aggrieved by the same, the Revenue has preferred these appeals raising the following substantial questions of law in each case:
1. Whether in the circumstances of the case, the Tribunal was right in upholding the order of the CIT (A) that penalty under Section 271(1)(C) ought not to be imposed in respect of undisclosed income of political persons, on the presumption that these amounts may represent donations and not income ?
2. Whether in the circumstances of the case, the Tribunal was right in upholding the order of the CIT(A) that the explanation to Section 271(1)(C) is not applicable to the assessee's case ?
3. Whether in the circumstances of the case, the Tribunal was right in upholding the order of the CIT(A) deleting the penalty, when he himself had upheld the addition of Rs. 8,50,000/- as bogus transactions in the quantum appeal ?
4.1. The issue raised in the above questions of law is squarely covered against the Revenue by the following decisions of this Court:-
1. Commissioner of Income-tax, Tamilnadu-V v. S.A. Rajamanickam
2. C.P. Chitrarasu v. Commissioner of Income-tax
3. Commissioner of Income-tax v. M. Balamuralikrishna .
4.2. In the first decision, viz., Commissioner of Income-tax, Tamilnadu-V v. S.A. Rajamanickam , cited supra, this Court has held as follows:-
...that there being no evidence to substantiate the contention that the amount was paid to the assessee as remuneration for his service to any particular individual or to the political party, the amount could only be treated as a gift or a windfall received by the assessee for his personal qualities. There was no quid pro quo in the payment of the donation made by the general public, the former employer and the partymen. Consequently, the Tribunal was right in its view and the sum of Rs. 51,000 was not taxable as the assessee's income.
4.3. In the second decision, viz., C.P. Chitrarasu v. Commissioner of Income-tax , cited supra, this Court has held as follows:-
... that merely because a member of a political party received gifts, the amount of the gift would not necessarily become income by way of remuneration for the services rendered as a member of the party. To hold that merely because the assessee was the member of the DMK party and wielded influence, the people collected funds was to ignore the positive case of the assessee that his services to Tamil and his performance as an author had earned him the respect of the people. A receipt does not necessarily arise from the exercise of a profession or vocation. The Tribunal was, therefore, not right in its conclusion that the sum of Rs. 48,176/- was liable to tax as income arising from vocation or occupation of the assessee.
4.4. In the last decision, viz., Commissioner of Income-tax v. M. Balamuralikrishna . cited supra, this Court has held as follows:-
...that the amount of Rs. 30,000/- given to the assessee after going through a career as a musician for 30 years was not intended to promote his art fruther because if members of the public or his friends came out with a subscription for his benefit at the end of his 30-year career, he must be assumed to have achieved a stature of his own which was not necessary to be enhanced any more by the attraction of receiving the sum of Rs. 30,000. On the facts of this case, the sum of Rs. 30,000 could not be said to be remuneration for past services. Though the assessee was an artist by profession, there was no direct nexus between this payment and his vocation, though there might be an indirect connection between the two. It was the expression of the goodwill that the admirers and fans of the assessee had for him that was responsible for the gift. Though the goodwill and respect might have been earned by the assessee as a result of his past performances, the amount could not be said to have been paid to him by way of remuneration for those services. The Tribunal, on the facts, was justified in its conclusion that the receipt of Rs. 30,000 was not taxable as income of the assessee.
5. As the issue raised in the above questions of law has already been decided by the above decisions of this Court in favour of the assessee, we do not see any merit in these appeals and the same are dismissed. No costs. Consequently, connected TCMPs are also dismissed.