Punjab-Haryana High Court
Commissioner Of Income-Tax vs Hoshiarpur Express Transport Co. Ltd. on 15 October, 1985
Equivalent citations: [1986]162ITR393(P&H)
JUDGMENT Gokal Chand Mital, J.
1. M/s. Hoshiarpur Express Transport Company Ltd. (hereinafter called "the assessee"), carries on passenger transport business. For the assessment years 1950-51 to 1953-54, the original assessments were completed by the Income-tax Officer as follows :
Assessment year Date of order Income assessed Rs.
1950-51 14-8-1951 4,952 (loss) 1951-52 7-9-1951 35,367 1952-53 30-11-1955 52,471 1953-54 do.
92,425
2. In the year 1957, the assessee through Gurnam Singh, office manager, got a case registered under Section 408 of the Indian Penal Code against Chaman Lal and Sansar Chand, its employees, for defalcation of the asses-see's funds. During the trial of that criminal case, the accused produced four diaries relating to the assessee's account for the years 1950-51 to 1953-54 to prove that the assessee-company was maintaining two sets of accounts to avoid disclosure of true income to the Income-tax Department and the ones produced in the court were the secret account of the assessee which showed much higher income for the four years with which we are concerned.
3. On receipt of the information from the criminal court, the Income-tax Officer reopened the assessment proceedings under Section 34(1)(a) of the Indian Income-tax Act, 1922, and reassessed the income as follows :
Year Amount Rs.
1950-51 1,26,662 1951-52 1,49,705 1952-53 1,11,617 1953-54 1,54,845 Against the aforesaid reassessment, the assessee took the matter in appeal before the Tribunal. The Tribunal confirmed the finding of the Income-tax Officer that the assessee had been maintaining two sets of accounts, one for the purpose of the Income-tax Department and the other for the purpose of distribution of concealed income amongst the shareholders. It also confirmed the finding of the Income-tax Officer that the four diaries produced in the criminal court belonged to the assessee and that substantial income had been concealed by the assessee which had not been shown in the returns. However, the Tribunal recomputed the income on optimum basis and estimated the same at a lower figure, which would be clear from the following comparative table :
Years Income assessed as per the order of ITO u/s. 34 Rs.
Income estimated by the Tribunal Rs.
1950-51 1,26,662 70,000 1951-52 1,49,705 95,000 1952-53 1,11,617 75,000 1953-54 1,54,845 1,11,316
4. The Income-tax Officer during the reassessment proceedings initiated penalty proceedings and since the minimum penalty leviable exceeded his jurisdiction, reference was made to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner came to the conclusion that there was positive finding of concealment of income by the Income-tax Officer and believing the same, he imposed penalty for assessment years other than 1952-53 under Section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as "the Act "), as it stood before the Explanation, which was inserted with effect from April 1, 1964, on the basis of the tax sought to be evaded. For the assessment year 1952-53, he invoked the Explanation to Section 271(1)(c) of the Act, because the assessee had filed the revised return in March, 1969, during the reassessment proceedings. For this year, 100 per cent, penalty was levied on the concealed income. Penalty was imposed by the Inspecting Assistant Commissioner by taking into consideration the orders passed by the Income-tax Officer in the reassessment proceedings.
5. The assessee challenged the orders of the Inspecting Assistant Commissioner by filing four appeals before the Tribunal. All the four appeals were consolidated and a common order was passed. The Tribunal by order dated April 30, 1977, for the assessment years other than 1952-53 came to the conclusion that under Section 271(1)(c) of the 1961 Act, penalty is imposable for conscious concealment and since the income was recomputed on optimum receipt basis which was a matter of opinion of the Tribunal, it cannot be said as to what is the concrete figure of concealment which can be said to be within the knowledge of the assessee and for which mens rea could be attributed to it. Reliance was placed on CIT v. Anwar Ali [1970] 76 ITR 696 (SC), for the proposition that it was for the Revenue to prove that income estimated by the Appellate Tribunal on optimum basis really represented the income of the assessee. Since there was no proof on the record that the estimated income was really earned by the assessee and in the absence of proof of positive concealment, no penalty was leviable for those three assessment years.
6. As regards assessment year 1952-53, the Explanation to Section 271(1)(c) of the 1961 Act was applied for the same reason on which the Inspecting Assistant Commissioner had applied the Explanation. The Tribunal then proceeded to hold as follows, keeping in view the dictum laid down in CIT v. Patna Timber Works [1977] 106 ITR 452 (Pat):
"...The onus which lay on the assessee under the Explanation has to be seen in this light. The question is whether the assessee company has concealed the income estimated by the Appellate Tribunal on optimum basis due to any fraud or gross or wilful negligence. The answer is very clear. Concealed income has been recomputed by the Appellate Tribunal on estimate basis. As it is not proved that the income estimated by the Appellate Tribunal was positively concealed by the assessee, it would be difficult to hold that the assessee company had known earlier about the concealed income as estimated by the Appellate Tribunal. Since the concealed income estimated by the Appellate Tribunal was not at all within the knowledge of the assessee company, it cannot be said that the assessee fraudulently concealed that amount. Fraud means misrepresentation of facts intentionally. The fact, according to the Revenue, is that the income estimated by the Appellate Tribunal on optimum basis was concealed by the assessee. In our opinion, as the Appellate Tribunal proceeded on estimate basis, it cannot be said that the estimated income which is said to be concealed was within the knowledge of the assessee-company. Therefore, the question of misrepresenting that fact does not arise. Similarly, there is no proof of wilful or gross negligence. There would have been negligence on the part of the assessee had the assessee known about the income estimated by the Appellate Tribunal on optimum receipt basis......"
7. On the aforesaid reasoning, it was concluded that for the year 1952-53, no income was concealed due to any fraud, gross or wilful neglect. As a result, the levy of penalty for all the four years was cancelled. The Revenue sought a reference and the Tribunal has referred the following common questions of law :
" 1. Whether the Tribunal was right in departing from the finding in the assessment appeal and holding that there was no concrete finding of concealment which could be said to be within the knowledge of the assessee-company and that the estimate in respect of the concealed income is a matter of opinion and not attributable to fraud or wilful neglect of the assessee ?
2, Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that no penalty was leviable under Section 271(1)(c) of the Income-tax Act, 1961, for the assessment years 1950-51 to 1953-54?"
8. Question No. 1.--The crucial point for consideration is whether the Tribunal was right in departing from the finding recorded by it in the quantum appeal while considering the levy of penalty. In the assessment proceedings, it was categorically held by the Tribunal that the assessee had concealed his income which was not shown in the returns; that the assessee had maintained two sets of accounts, one for the purposes of the Income-tax Department and another for distribution of concealed income amongst the shareholders; that the four diaries produced in the criminal court belonged to the assessee and relying on the evidence emerging from the four diaries, the Tribunal held that substantial income had been concealed and the true and full income from the transport business was not shown in the returns filed. These very findings were given by the Income-tax Officer in reassessment proceedings as also by the Inspecting Assistant Commissioner in the penalty proceedings. The Tribunal departed from those findings in the penalty proceedings only to the limited extent that because the income was computed on optimum receipt basis, it impliedly inferred that the Tribunal in assessment proceedings did not place reliance on the diaries. The Tribunal specifically made the following observations:
" The position would have been different if the concealed income was computed on the basis of the entries made in the four dairies."
9. What was to be seen in the penalty proceedings was whether there was material before the Tribunal for recording a finding that the assessee concealed the particulars of its income or deliberately furnished incorrect particulars of such income and if there was material, then penalty could be levied. The law, in this behalf, has been settled by the Supreme Court in Anwar Ali's case [1970] 76 ITR 696 and in Anantharam Veerasinghaiah and Co. v. CIT [1980] 123 ITR 457. According to the dictum of the aforesaid authorities, the onus is on the Department and there has to be some material apart from the falsity of the assessee's explanation to support the finding that the receipt was the assessee's income. The following observations in Anwar Ali's case [1970] 76 ITR 696 (SC), which were reiterated in the later judgment, deserve to be kept in view (at p. 701):
" The gist of the offence under Section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and, therefore, the Department must establish that the receipt of the amount in dispute constitutes the income of the assessee. If there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income.
Another point is whether a finding given in the assessment proceedings that a particular receipt is income after rejecting the explanation given by the assessee as false would, prima facie, be sufficient for establishing, in proceedings under Section 28, that the disputed amount was the assessee's income. It must be remembered that the proceedings under Section 28 are of a penal nature and the burden is on the Department to prove that a particular amount is a revenue receipt. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars."
10. From the aforesaid dictum, it is clearly established that the falsity of the explanation would not necessarily give rise to the inference that the disputed amount represents the income of the assessee. All the same, the findings given in the assessment proceedings for determining or computing the tax is good evidence although not conclusive. It is also clear that before penalty could be imposed, the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars of income. While applying the aforesaid dictum to the facts of the present case, it is more than clear and plain that in the reassessment proceedings, the Tribunal found that the assessee had maintained two sets of accounts, one for the purpose of the Income-tax Department and another for the purpose of distribution of concealed income amongst the shareholders. It also believed that the four diaries produced by the accused before the criminal court belonged to the assessee. On the basis of the evidence emerging from the four diaries, the Tribunal concluded that substantial income had been concealed by the assessee and the full income from the transport business was not shown in the returns filed by the assessee. While considering this matter in the penalty proceedings, the Tribunal although it referred to the aforesaid facts, yet concluded that the estimate of income made on the optimum receipt basis was a matter of opinion and there was no proof on record that the income estimated was really earned by the assessee. This finding of the Tribunal in penalty proceedings is clearly contrary to the findings recorded by the Tribunal in reassessment proceedings.
11. Duplicate sets of accounts in the nature of four diaries were found. From these diaries, it was noticed by the Income-tax Officer as to how much income was divided between the co-sharers in regard to the four relevant years. That was taken notice of while making the reassessment. The Tribunal accepted all the findings of the Income-tax Officer which have been reproduced above more than once and gave a categoric finding that the diaries belonged to the assessee and that the duplicate sets of accounts were kept for the distribution of concealed income amongst the shareholders, which represented concealed income of the assessee and that full income earned from the transport business was not shown in the returns filed by the assessee. To this extent, there was definite material and a positive finding was given as to what was shown therein represented the concealed income of the assessee. The opinion was only limited to the computation of the income of the assessee as disclosed from the four diaries on the optimum receipt basis. The figures arrived at by the Tribunal, therefore, clearly represented the income of the assessee from the transport business.
12. The next question is as to whether it can be said on the facts of this case that the assessee had consciously concealed the particulars of income or had deliberately furnished inaccurate particulars. The only answers which can be given in terms of the decision in Anwar Ali's case [1970] 76 ITR 696 (SC) on the facts of this case is that the four diaries constituted good evidence in addition to the findings recorded by the Tribunal in reassessment proceedings, from which the irresistible conclusion is that the assessee consciously concealed the particulars of its income or had deliberately furnished inaccurate particulars to avoid payment of income-tax on its true income. If, on these facts, it cannot be so held, then there may not be any case in which such a finding may possibly be given. The decision to the contrary given by the Tribunal is clearly illegal and erroneous and is contrary to the dictum laid down in Anwar Ali's case [1970] 76 ITR 696 (SC).
13. The entire stress of the argument on behalf of the assessee was that since the estimate was made on the basis of the optimum receipt basis, such figure could never be treated as the income of the assessee. On the facts of this case, we are not impressed with this argument. It is not a case where some entry is found in the books of account of the assessee or is found in the bank account of the assessee or some amount is found in its hands from undisclosed sources and he furnished his explanation for the same which does not satisfy the Income-tax Officer in assessment or reassessment proceedings. Therefore, by rejecting the explanation, the amount is treated as income from undisclosed sources as was done in Anwar Ali's case [1970] 76 ITR 696 (SC) Bat, in the present case, we have the four diaries which clearly go to show that they are in regard to the transport business of the assessee and that they are keeping duplicate sets of accounts relating to the transport business and whatever figures are shown in the secret diaries, those were divided between the shareholders as the income from the transport business.
14. The aforesaid view of ours finds support from the following decisions :
(1) CIT v. E.V. Rajan [1985] 151 ITR 189 (Mad), (2) A.K. Bashu Sahib v. CIT [1971] 108 ITR 736 (Mad), (3) Kedar Nath Sanwal Dass v. CIT [1978] 111 ITR 440 (P & H), (4) Shiv Narain Khanna v. CIT [1911] 107 ITR 542 (P & H) and (5) Vidya Sagar Oswal v. CIT [1977] 108 ITR 861 (P&H).
15. We need not give the facts of the aforesaid five cases. However, we do wish to refer to the facts of Anwar Ali's case [1970] 76 ITR 696 (SC), From the bank account of the assessee, an item of Rs. 87,000 was found which was not disclosed in the return. When the bank account came to the notice of the Income-tax Officer, he called upon the assessee to explain. The assessee explained that his relations got panicky during the communal riots in Bihar in the year 1946 and entrusted him with whatever cash amounts they had with them at that time for safe custody and the names of the relations and the amount given by them was detailed. The explanation was found unsatisfactory and the amount shown in the bank deposit was treated as income from undisclosed sources. When penalty proceedings were started, the Department led no fresh evidence and merely relied on the findings recorded in the assessment proceedings. Since the Department did not lead any evidence to pinpoint that the amount of Rs. 87,000 represented the income of the assessee, penalty was not levied.
16. Shri Sodhi on behalf of the assessee urged before us that for the assessment year 1952-53, the Tribunal erred in applying the Explanation, which was added to Section 271(1)(c) with effect from April 1, 1964. This matter was decided in favour of the Department, first by the Inspecting Assistant Commissioner and then by the Tribunal. The assessee did not seek any reference on this aspect of the case and, therefore, we cannot go into this point. If the Tribunal was not right in applying the Explanation for the assessment year 1952-53, reference should have been sought on that matter. In the absence of any reference on that matter, we find no justification for allowing this point to be raised.
17. For the reasons recorded above, we disagree with the Tribunal and hold that it erred in departing from the findings in the quantum appeal recorded by the Tribunal and it farther erred in coming to the conclusion that there was no concrete finding of concealment of income within the knowledge of the assessee and that the estimate of the concealed income was a matter of opinion. We also hold that the assessee had consciously concealed the particulars of its income or had deliberately furnished in accurate particulars. Accordingly, we answer question No. 1 in favour of the Department and against the assessee.
18. Question No. 2.--In view of the findings recorded under question No. 1, for the assessment years 1950-51, 1951-52 and 1953-54, the Tribunal clearly erred in law in holding that no penalty is leviable under Section 271(1)(c) of the Act.
19. As regards the assessment year 1952-53, in spite of applying the Explanation which was added to Section 271(1)(c) of the Act with effect from April 1, 1964, the Tribunal seriously erred in law in opining that there was negative burden on the assessee which stood discharged because the income was estimated by the Tribunal on optimum receipt basis. In view of the latest Full Bench decision of this court in Vishwakarma Industries v. CIT[1982] 135 ITR 652, three presumptions have to be raised as enumerated therein and it is for the assessee to rebut those presumptions and in view of the Explanation, the Tribunal seriously erred in law in spying that the onus which lay on the assessee stood discharged merely because the income was estimated on optimum receipt basis. Since, for this year, the presumptions which arise against the assessee have not been rebutted, the Tribunal was in error in not levying penalty in view of the dictum laid down in Vishwakarma Industries' case [19821 135 ITR 652 (P & H) [FB]. Accordingly, this question is also answered in favour of the Department and against the assessee, i.e., in the negative.
20. The reference stands disposed of and the assessee shall pay the costs of the Department Counsel's fee is assessed at Rs. 500.
S.P. Goyal, J.
21. I agree.