Madhya Pradesh High Court
Vimal Ginning And Pressing Factory vs Commissioner Of Income-Tax on 15 March, 2005
Equivalent citations: (2005)199CTR(MP)397, [2005]279ITR100(MP)
Author: A.M. Sapre
Bench: A.M. Sapre
JUDGMENT A.M. Sapre, J.
1. This is an income-tax reference made by the Income-tax Appellate Tribunal (Tribunal) at the instance of the assessee under Section 256 of the Income-tax Act, 1961, in R. A. Nos. 59 and 60/Ind/1998 dated January 15, 2004, which arises out of an order dated February 12, 1998, passed by the Tribunal in I. T. A. No. 706/Ind/1992 and I. T. A. No. 1000/Ind/1993 to answer the following questions of law said to arise out of the aforementioned appellate orders:
"1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in confirming the addition of Rs. 30,000 as concealed income of the assessee?
2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in justifying the levy of penalty of Rs. 18,000 under Section 271(1)(c) of the Income-tax Act, 1961?"
2. The dispute relates to the assessment year 1988-89 and it centres around a question as to whether the Assessing Officer, Commissioner of Income-tax (Appeals) and the Tribunal were justified on their part in imposing and then upholding the addition of Rs. 30,000 in the total income of the assessee as an income from undisclosed source and then were justified in consequence to impose and uphold an amount of Rs. 18,000 by way of penalty under Section 271(1)(c) of the Act.
3. The assessee is a firm engaged in the business of cotton ginning and pressing. They filed the return for the assessment year in question declaring their income of Rs. 1,54,780. However, the Assessing Officer completed the assessment by his order dated February 20, 1989, on a total income of Rs. 1,87,780 which included an addition of Rs. 30,000 as an income from undisclosed source. This led to initiation of penalty proceedings under Section 271(1)(c) of the Act as in the opinion of the Assessing Officer, the addition of Rs. 30,000 was in the nature of concealment and not disclosure of true income.
4. The assessee gave the following explanation to the impugned addition:
"That in the course of assessment proceedings the assessee has offered explanation regarding a sum of Rs. 30,000 credited into the books on December 23, 1986, and also substantiated the same with material facts and evidence. In this connection your attention is invited towards the assessee's letter dated January 25, 1989, submitted before the Income-tax Officer in the course of assessment proceedings, wherein full facts regarding credit of Rs. 30,000 has been explained with material evidence. From the assessment order, it is evident that the explanation offered by the assessee has been disbelieved and the aid has been termed as an afterthought. The explanation offered and bona fide substantiated by the assessee has not been found false in the assessment proceedings. In short the explanation offered and substantiated by the assessee has been disbelieved /discharged and a sum of Rs. 30,000 has been assessed on account of alleged concealed income which does not ipso facto constitute concealed income of the assessee. The assessee has filed second appeal before the Tribunal challenging addition of Rs. 30,000."
5. It is this explanation which did not find favour either with the Assessing Officer or with the Commissioner of Income-tax (Appeals) and lastly, with the Tribunal giving rise to the making of this reference by the Tribunal at the instance of the assessee.
6. Heard Shri K. R. Mandovara, learned counsel for the applicant and Shri R. L. Jain, learned senior counsel with Ku. V. Mandlik, learned counsel for the non-applicant.
7. Having heard learned counsel for the parties and having perused the record of the case, we are inclined to answer the questions referred against the assessee and in favour of the Commissioner of Income-tax (Revenue).
8. This is what the Tribunal has held while dismissing the appeal filed by the assessee thereby upholding the penalty:
"We are inclined to agree with the above findings of the Commissioner of Income-tax (Appeals), as no material has been brought on record by the assessee to substantiate the explanation offered by it before the Assessing Officer, in its reply dated January 25, 1989. in our opinion, the explanation of the assessee has rightly been rejected as only an afterthought. We, accordingly, reject both the grounds of the assessee.
4. In the result, the appeal is dismissed."
9. In our considered opinion, it is difficult to take a different view than the one taken by the three authorities on the basis of the factual explanation offered by the assessee on the question involved, i.e., addition of Rs. 30,000. In the first place, it is a case of concealment on the part of the assessee. Secondly, it is a case where the assessee made an attempt to explain but could not persuade the three authorities of his explanation. Thirdly, the reference court cannot go into the adequacy of the explanation again in its reference jurisdiction in abstract form for want of any legal issue/interpretation involved and lastly, once the addition is upheld then the penalty has got to be imposed consequent upon the rejection of the explanation offered. In other words, once the explanation offered by the assessee is rejected then in that event, a case for imposition of penalty under Section 271(1)(c) is made out. It is much more so when there is no technical issue is involved.
10. In our opinion, looking to the question referred and the manner in which it is framed, the Tribunal seems justified in upholding the penalty under Section 271(1)(c) of the Act. In fact, in view of the finding returned on the facts the only conclusion that could be drawn out of the finding was that of imposition of penalty under Section 271(1)(c) ibid.
11. Learned counsel for the assessee placing- reliance on a decision reported in Gopichand Gupta v. CWT contended that no case for imposition of penalty is made out in the facts of the case. We do not agree. The case relied on is distinguishable on the facts and cannot be applied for deciding the question in favour of the assessee.
12. In view of the aforesaid discussion, we answer the questions referred supra against the assessee and in favour of the Commissioner of Income-tax (Revenue).