Calcutta High Court
Girdharilal Soni vs Commissioner Of Income-Tax on 21 March, 1989
Equivalent citations: [1989]179ITR111(CAL)
Author: Suhas Chandra Sen
Bench: Suhas Chandra Sen
JUDGMENT Suhas Chandra Sen, J.
1. Two questions of law have been referred to this court under Section 256(2) of the Income-tax Act, 1961 :
"(a) Was the Tribunal justified, legally or otherwise, in disposing of the appeal by ignoring the contention of the applicant that no proper opportunity of being heard in the matter of penalty proceedings was allowed by the Inspecting Assistant Commissioner ?
(b) Is not the order of the Tribunal confirming the levy of penalty vitiated and/or liable to be set aside ?"
2. The assessment year involved is the assessment year 1968-69 for which the previous year ended on October 31, 1967. The facts of the case found by the Tribunal have been stated as under :
The assessee filed his return on June 3, 1968, declaring a total income of Rs. 23,576. During the course of assessment proceedings, the Income-tax Officer enquired of the assessee the nature and source of Rs. 25,000 being a loan alleged to have been taken by the assessee in the name of Eastern Industries Corporation. The Income-tax Officer treated Rs. 25,000 as the assessee's income from business in his order of March 14, 1972, the relevant portion of which reads as under :
"Sri N. C. Khasnabia, Advocate, appears and submits that it would not be possible for them to satisfy the cash credit amounting to Rs. 25,000 in the name of Eastern Industries Corporation and hence he volunteers on behalf of the assessee that the said amount of Rs. 25,000 be treated as the assessee's income from business. As regards other cash credits .... (Sd.) Income-tax Officer Agreed.
(Sd.) Khasnabia."
3. The Income-tax Officer framed the assessment on a total income of Rs. 76,718. Simultaneously, he initiated penalty proceedings under Section 271(1)(c) of the Act and referred the matter to the Inspecting Assistant Commissioner as the minimum penalty imposable under that section exceeded Rs. 1,000. The Inspecting Assistant Commissioner, after noticing that the aforesaid addition was upheld by the Appellate Assistant Commissioner and that no further appeal was preferred by the assessee against the said order of the Appellate Assistant Commissioner, came to the conclusion that the assessee had concealed the particulars of his income and, therefore, the provisions of Section 271(1)(c) of the Act were clearly attracted in his case. He, accordingly, imposed a penalty of Rs. 32,500.
4. Against this order of the Inspecting Assistant Commissioner, the asses-see preferred an appeal before the Tribunal and it was urged on behalf of the assessee that the Inspecting Assistant Commissioner was not justified in imposing penalty under Section 271(1)(c) of the Act. Both the parties to the dispute relied on certain decisions of High Courts mentioned in para 5 of the order of the Tribunal under reference. The Tribunal, after considering the rival submissions of the parties, upheld the order of the Inspecting Assistant Commissioner imposing penalty of Rs. 32,500 under Section 271(1)(c) of the Act.
5. So far as the first question is concerned, nothing has been shown to suggest that the Tribunal had failed to deal with any contention raised by the applicant. It has not been shown as to how it can be said that no proper opportunity of being heard was given by the Inspecting Assistant Commissioner. On the contrary, the Inspecting Assistant Commissioner has recorded in his order that a notice of hearing was given. No one appeared on behalf of the assessee. But a letter was filed on January 29, 1974. In that letter, a stand has been taken that the assessee's representative had agreed to the above addition of Rs. 25,000 on the assurance from the Income-tax Officer that no penalty proceedings would be initiated.
6. Therefore, it clearly appears that the assessee was given a proper opportunity of being heard by the Inspecting Assistant Commissioner. But the assessee, instead of appearing in person, sent a letter.
7. It does not appear that the assessee raised any dispute about this before the Tribunal. The first question assumes that the contention of the applicant was ignored. We, therefore, decline to answer the first question as framed. But we state that from the facts on record, it appears that proper opportunity of being heard was given to the assessee in the penalty proceedings by the Inspecting Assistant Commissioner.
8. The second question, however, creates some difficulty. Apart from the assessee's disclosure in the petition in which he has added a sum of Rs. 25,000, nothing else has been produced by the Department to show that there was any concealment of income. There is no positive finding of fact to indicate any mens rea on the part of the assessee. The Supreme Court, recently, in the case of Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 has reiterated the law that penalty cannot be imposed merely because of assessment of undisclosed income. The Supreme Court observed in that case that the amount may be agreed to be added as concealed income. There may be a hundred and one reasons for such admission, i. e., when the assessee realises the true position, it does not dispute certain disallowances. But that does not absolve the Revenue from proving mens rea in a quasi-criminal offence.
9. In the instant case, nothing more has happened than what was stated by the Supreme Court. The assessee had agreed to the inclusion of a certain amount as its income in the assessment proceedings but nothing else was produced by the Department to show that the amount was really the concealed income of the assessee. Penalty cannot be imposed merely on suspicion.
10. Under the circumstances, the first question is answered in the following manner :
(1) There is no evidence to show that the Tribunal, in disposing of the appeal, had ignored the contention of the applicant.
(2) There is evidence to show that proper opportunity of being heard was given by the Inspecting Assistant Commissioner. This question is answered against the assessee.
11. The second question is answered in the affirmative and in favour of the assessee.
12. There will be no order as to costs.
Bhagabati Prasad Banerjee, J.
13. I agree.