Bombay High Court
Commissioner Of Income-Tax vs Dajibhai Kanjibhai on 20 February, 1991
Equivalent citations: [1991]189ITR41(BOM)
JUDGMENT T.D. Sugla, J.
1. In this departmental reference relating to the assessee's assessment for the assessment year 1969-70, the Income-tax Appellate Tribunal has referred to this court the following six question of law under section 256(1) of the Income-tax Act, 1961. The question read thus :
"(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the penalty under section 271(1)(c) of the Income-tax Act, 1961 ?
(2) Whether the Tribunal was right in law in holding that the charge of filing inaccurate particulars was unsustainable because the basic fact for framing an assessment was made known by the assessee himself by disclosing prize money receipt in Part-IV of the return ?
(3) Whether the finding of the Tribunal that the primary ingredient for initiating penalty proceedings was absent in this case as the Income-tax Officer did not record his satisfaction during the course of the assessment proceedings is correct in law ?
(4) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Inspecting Assistant Commissioner had wrongly applied the Explanation to section 271(1)(c) ?
(5) Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that no opportunity was given to the assessee when the Explanation to section 271(1)(c) was invoked by the Inspecting Assistant Commissioner is sustainable in view of the notice of the Inspecting Assistant Commissioner dated February 1, 1974 ?
(6) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in rejecting the miscellaneous application of the Revenue requiring the Tribunal to hold that the Explanation to section 271(1)(c) was invoked and the assessee was given opportunity to refute the charge ?"
2. For the sake of convenience, we will take up question No. 3, as that is the basic question and if that can be answered in favour of the assessee, no other questions will survive. Briefly stated, the facts in this reference are that, while completing the assessment under section 144 of the Income-tax Act, 1961, and computing the assessee's total income at Rs. 3,05,412 as against the declared income of Rs. 250 only, the Income-tax officer stated in the last paragraph of the assessment order as under :
"Assessed under section 144 of the Act. Issue notice of demand. Issue notice under sections 271(1)(a), 273(b) and 271(1)(b) of the Act Charge interest under section 217. Give concession in tax as per Taxation Concessions Order, 1964."
3. Though section 271(1)(c) was not mentioned as one of the section which the Income-tax Officer was satisfied was attracted, the Inspecting Assistant Commissioner to whom the reference was made imposed penalty of Rs. 3 lakhs under section 271(a)(c) of the Income-tax Act, 1961, by his order dated March 30, 1974. The Inspecting Assistant Commissioner had, it may be stated, allowed the assessee an opportunity of hearing before passing his order. In the appeal filed by the assessee before the Tribunal, a number of grounds were taken. One of the grounds was that the Income-tax Officer was not satisfied during the course of the assessment proceedings that the penal provisions of section 271(1)(c) were attracted and as such imposition of penalty under section 271(1)(c) was not justified. The Tribunal accepted this contention and allowed the appeal on this ground amongst many other grounds.
4. Mr.Jetley, learned counsel for the Revenue, has fairly taken us through the order of assessment to show that, factually, it has not been mentioned by the Income-tax Officer in the order of assessment that he was satisfied about the applicability of the provisions of section 271(1)(c). He however, stated that the facts referred to in the order of assessment clearly indicate that the assessee had concealed his income. On the other hand, Mr.Pikale, learned counsel for the assessee, relied upon the Supreme Court's decision, CIT v. S. V. Angidi Chettiar , and on a decision of our court in the Income-tax Reference No. 417 of 1976 in which, by order dated December 22, 1988, this court held that there income was shown in Part-IV of the return, the charge of concealment under section 271(1)(c) cannot be said to have been established.
5. In our judgment, the legal position in this regard is now well settled. In view of the Supreme Court's decision in CIT v. S. V. Angidi Chettiar supra, power to impose penalty under section 28 of the old Act corresponding to section 271 of the new Act depends upon the satisfaction of the Income-tax Officer in the course of the proceedings under the Act. It cannot be exercised if he is not satisfied and has not satisfied and has not recorded his satisfaction about the existence of the conditions specified in clauses (a), (b) and (c) before the proceedings are concluded. There is no evidence on record to show that the Income-tax Officer, in this case, was satisfied in the courts of the assessment proceedings. Therefore, we must hold that the penal provisions of section 271(1)(c) were not attracted in this case. The question is, therefore, answered accordingly in the affirmative and in favour of the assessee. In view of our answer to question No. 3, no other questions survive and are, accordingly, not answered. It is made clear that the penalty imposed by the Inspecting Assistant Commissioner stands hereby quashed. No order as to costs.