Income Tax Appellate Tribunal - Nagpur
Income-Tax Officer vs Dhanpatrai Badridas Malhotra on 13 August, 1990
Equivalent citations: [1990]35ITD247(NAG)
ORDER
G.K. Israni, Judicial Member
1. These appeals - five by the department and one by the assessee-are directed against the consolidated order of the learned CIT(A) dated 14-2-1986 in relation to the assessment years 1978-79 to 1982-83.
2. The departmental appeals challenge the order of the CIT(A) cancelling the penalties under Section 271( l)(c) for the five years in question. The assessee's appeal challenges that part of the order of the CIT(A) in relation to the assessment year 1982-83, whereunder a part of the penalty under the aforesaid provision was maintained.
3. The assessee, an individual, carried on the business in handloom under the name and style of M/s. India Handloom House, Nagpur. The income returned by the assessee and assessed for the five years was as under:
Asst. Year Date of Income Date of Income
return returned asst. Under assessed
Rs. Section 143(1) Rs.
1978-79 16-6-1978 11,230 21-6-78 11,230
1979-80 30-6-1979 12,940 26-9-79 12,940
1980-81 1-9-1980 14,952 14-9-81 14,952
1981-82 31-7-1981 28,647 3-11-81 28,647
1982-83 21-7-1982 53,570
4. On 18-11-1982 a search under Section 132 was carried out at the residential and business premises of the assessee. Cash of Rs. 6,677, ornaments valued at Rs. 41,505 and some books, documents, etc. were seized. A sworn statement of the assessee was also recorded. The books and documents seized during the said search showed that the assessee had surreptitiously carried on business in curtain cloth, etc. in eight fictitious names as listed below:
1. Hindustan Traders.
2. Gadge Sales Corporation.
3. Associated Agencies.
4. Evergreen Agencies.
5. M/s. Asain Enterprises.
6. M/s. Khadatkar & Co.
7. M/s. Wiltex at Bombay.
8. M/s General and Allied Agencies.
On 10-1-1983 the assessee filed a petition purportedly under Section 273A(4) before the Commissioner of Income-tax Nagpur, wherein he denied to have carried on any business in any other name except those mentioned above. He offered to be taxed on a total sum of Rs. 7,00,000 spread over the said five years. He also filed fresh returns on the same day surrendering the additional income of Rs. 7,00,000. The Income-tax Officer issued and served notices under Section 148 for the said five years on 12-1-1983. The assessments were finalised on 26-2-1983, wherein the Income-tax Officer acted upon the income disclosed. The relevant figures are as under:
Asst. Year Income declared in Income assessed fresh returns Under Section 1481143(3) Rs. Rs. Under Section 1978-79 1,11,230 1,11,230 148/143(3) 1979-80 1,12,940 1,12,940 -do-
1980-81 1,64,950 1,64,950 -do-
1981-82 1,78,650 1,78,650 -do-
1982-83 2,40,404 2,40,400 Under Section
143(3)
5. The Income-tax Officer also initiated proceedings under Section 271(1)(c)for the five years and levied penalties after overruling the assessee's objections.
6. The penalty orders were challenged in appeals before the learned Commissioner (appeals). The first appeals for the four years from 1978-79 to 1981-82 were allowed in full and the penalties were cancelled in their entirety. So far as the appeal for the assessment year 1982-83 is concerned, out of a penalty of Rs. 1,29,100, the learned Commissioner (Appeals) maintained a penalty only of Rs. 6,834 and cancelled the rest. It is these orders of the learned Commissioner (Appeals) which have been challenged in these appeals. Whereas the departmental challenge is in relation to all the five years, the assessee's challenge is only in relation to that part of the order of the learned Commissioner (Appeals) whereunder the penalty of Rs. 6,834 was maintained in relation to the assessment year 1982-83.
7. The arguments of the learned Departmental Representative and the learned counsel for the assessee were heard.
8. It was urged by the learned Departmental Representative that there was absolutely no justification for the learned Commissioner (Appeals) to have cancelled the penalties. The fact that the assessee was carrying on a large number of businesses in fictitious names and was not declaring their income was detected only in search and seizure proceedings. The assessee filed revised returns only after such search and seizure. It was, therefore, not correct for the assessee to contend that he had made a voluntary disclosure inasmuch as the same was made only after search and seizure of the books of account and documents. The facts that the assessee was carrying on business clandestinely was admitted by him in his own statement under Section 131 and also in the petition under Section 273A(4) submitted before the Commissioner. The disproportion between the income assessed for the five years and the additional income disclosed in the revised returns was such that the concealment could not validly be held to have been unintentional or bona fide. In support of his arguments, the learned Departmental Representative relied upon the decisions in ITO v. Manoharlal M. Agrawal [1989] 30 ITD 151 (Nag.); Durga Timber Works v. CIT [1971] 79 ITR 63 (Delhi); Mahavir Metal Works v. CIT [1973] 92 ITR 513 (Punj. and Har.);Banaras Chemical Factory v. CIT [1977] 108 ITR 96(All.); Addl. CIT. v. Bhartiya Bhandar [1980] 122 ITR622 (MP) and Biland Ram Hargan Dass v. CIT [1987] 35 Taxman423 [1988] 171 ITR 390 (All.). As against this, it was contended by the learned counsel for the assessee that the disclosure made by the assessee, through his revised returns, was a voluntary one inasmuch as no assets were found during the search and seizure operations. Although the petition under Section 273A(4) continues to pend and has not yet been accepted, yet the revised returns have been acted upon and, therefore, the department was not justified in imposing the penalties. Support in this connection was sought from the decisions in Addl. CIT v. Kishan Singh Chand [1977] 106 ITR 534 (All.); CIT v. Vinaychand Harilal [1979] 120 ITR 752 (Guj.); CIT v. Amalendu Paul [1983] 13 Taxman 325 [1984] 145 ITR 439 (Cal.); Union of India v. Godfrey Philips (India) Ltd. [1986] 158 ITR 574 (SC) and Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705/33 Taxman 460A (SC).
9. We have considered the facts and circumstances of the case and thoughtfully studied the case-law cited on behalf of the parties and have come to the conclusion that there was no justification for the learned Commissioner (Appeals) to have interefered with the penalty orders of the Income-tax Officer and cancelled the penalties imposed by him. Let us first discuss the decisions relied upon by the learned counsel for the assessee. In the case of Kishan Singh Chand (supra) a higher flat rate of profit was applied in pursuance of an oral agreement between the Income-tax Officer and the assessee. It was in these circumstances that it was held that the assessee's agreement to be assessed at a higher flat rate will not amount to a concealment. In the case in hand, the admission of concealment was made by the assessee not only in the petition under Section 273A(4) but also in his sworn statement. Furthermore this is not a case of agreement or application of profit rate. This ruling of the Allahabad High Court thus does not offer any material help to the assessee in the present case. In the case of Vinaychand Harilal (supra), the assessee had made an admission before the Appellate Assistant Commissioner that the amount invested in the purchase of demand drafts belonged to him. There was no admission on the part of the assessee that the amount represented his income. It was in these circumstances that the Gujarat High Court held that such admission could not be sufficient for levying penalty under Section 271(1)(c). In the case of Amalendu Paul (supra) the decision is similarly distinguishable inasmuch as the assessee therein had failed to prove the source of credits as the creditor could not be found even after repeated issue of summons. It was in these circumstances that the assessee had filed revised return including the cash credit amount as income with the prayer that no penalty be levied. It was, therefore, held that such conditional admission of the assessee could not be relied upon for imposing penalty under Section 271(1)(c). The decision of the Supreme Court in Godfrey Philips (India) Ltd.'s case (supra) was pressed into service by the learned counsel for the assessee in support of his argument that since the Income-tax Officer, by basing his revised assessment on the revised return, has acted upon those returns he is now estopped from imposing any penalty. Here again we find that this ruling can hardly of any help to the assessee. There was no estopppel involved in the act of the Income-tax Officer basing his revised assessment on the revised returns filed by the assessee. The doctrine of estoppel cannot simply be applied to the facts of the present case inasmuch as no act of the Income-tax Officer shown to have induced the assessee to alter his position. In other words, it is not shown that it was because of any promise or inducement that the assessee filed his revised returns. The next decision in the case of Sir Shadilal Sugar & General Mills Ltd. (supra) also does not offer any assistance to the assessee inasmuch as that decision was rendered in the context of Section 271(1)(c) as it stood prior to its amendment in 1964. In the present case the clandestine carrying on of as many as eight businesses by the assessee and non-declaration, of their income by him can by no stretch of imagination, be regarded as bona fide or non-deliberate so as to justify the non-imposition of penalty under Section 271(1)(c).
10. Of the case-law relied upon by the learned Departmental Representative, the first decision relates to the case of Manoharlal M. Agarwal (supra). In that case, as a consequence of search of business and residence premises of the assessee under Section 132 resulting in discovery of several assets, the assessee filed revised return including additional income and the Income-tax Officer thereafter imposed penalties for additional income and such penalties were held to be good by the Tribunal. In the case in hand, although assets found in the search were not substantial, yet incriminating books and documents were found and seized and such books and documents could have proved the concealment of income by the assessee. But then, the assessee by filing revised returns admitted concealment and thereby precluded further investigation and inquiry in such concealment. The assessee, therefore, cannot thereafter be heard to say that he had not concealed any income or had not made any admission to that effect. The next case cited was that of Durga Timber Works case (supra). In that case the assessee made admission of concealment only after the cash credits were detected during the examination of the books. It was, therefore, held by the Delhi High Court that in such circumstances it would amount to laying an impossible burden of proof on the department and making the provision for imposition of penalty wholly unworkable, if even after the assessee had admitted that the two amounts of cash credits be treated as its concealed income, the department had still to prove by independent evidence that the assessee had concealed its income. In the present case also, the assessee, by filing his revised returns, had admitted the concealment and rendered it unnecessary for the department to make further investigation and inquiry on the basis of the books and documents seized during the search operations. The next case relied upon by the learned Departmental Representative was that of Mahavir Metal Works case (supra). It was held in that case that where the assessee himself, during the course of assessment proceedings, files a' revised return and owns a disputed amount to be his income and the admission of the assessee is proved by the department during the penalty proceedings, the onus on the department is discharged. In that situation the assessee is still to prove and it is open to him to prove in the penalty proceedings that the addition made by him during the course of the assessment proceedings was wrongly or illegally or was incorrect. He can lead evidence during the penalty proceedings to show that he had not concealed any income or furnished inaccurate particulars thereof. If he fails to prove this, the department would be justified in levying penalty on him under Section 271(1)(c). In the case in hand, in the penalty proceedings, the assessee does not appear to have made any attempt -serious or otherwise - to show that he had not concealed any income or furnished inaccruate particulars thereof. This decision of the Punjab High Court thus significantly helps the departmental case. The Departmental Representative's next reliance was on the decision in the case of Banaras Chemical Factory (supra). The facts of this case are on all fours with the facts of the present case and that decision offers significant support to the departmental case in the present appeals. It was held therein that inasmuch as the assessee having, by a voluntary disclosure, disclosed a concealed income of Rs. 6 lakhs, there can be no manner of doubt that the assessee was guilty of concealment and, as such, was liable to penalty. The law does not provide that if an assessee makes a voluntary disclosure of its concealed income it has to be absolved from penalty. It is the only circumstances to be taken into consideration while determining the quantity of penalty. In the case in hand, the disclosure made by the assessee in his revised returns could hardly be regarded as voluntary, inasmuch as it was forced upon him by the compelling circumstances of search and seizure wherein discriminating books of account and documents were seized. The decision of the Madhya Pradesh High Court in the case of Bhartiya Bhandar (supra) is similarly helpful to the revenue in the instant case. It was held therein that though the burden of proof in the preliminary sense of proving its case is always on the department yet where the department proves an unequivocal admission of the assessee, the onus of proof or the burden of proof in the secondary sense, i.e., in the sense of adducing evidence, shifts and it is then for the assessee to show by preponderance of probabilities that the admission was wrong or was made in such circumstances that it should not be acted upon or that the disputed amount did not constitute his income. It was further held therein that if an assessee, confronted with the entries, offers no explanation and admits that it was his concealed income and agrees to surrender the particular items for inclusion in his income, the surrender will amount to admission. In the present case, the assessee, at no stage, either in the assessment proceedings or in the penalty proceedings, questioned the fact that he had engaged in clandestine business and had generated income therefrom. The last ruling relied upon by the department was that of Biland Ram Hargam Dass case (supra). In this case, although no assets were seized and only incriminating papers were seized, yet, it was held that the revised return filed by the assessee showing higher income than that shown in the original return in consequence of surrender of income detected in such surrender could not be held to be voluntary, but due to detection by the ITO. Such surrendered income was held to be the concealed income and the penalty on that account was held to be justified.
11. In the present case, the total assessed income of the assessee for the five years in question was approximately Rs. 68,000, whereas the income returned by him in his revised returns was approximately of a sum of Rs. 7,68,000. There was such a great disproportion between the assessed income and the revised income that it was impossible for the assessee to have successfully shown that the understatement by him of his income was unintentional or bonafide. The assessee in his sworn statement and also in his petition under Section 273A(4) has unequivocally admitted that he has been surreptitiously carrying on under fictitious names, as many as eight businesses. The income generated therefrom could not be treated otherwise than a concealed income. From a perusal of the impugned order of the learned CIT(A) we find that there is a clear mis-statement of facts in paragraph 4 of his order. That mis-statement reads as under:
4. On 10-1-1983, the appellant filed a settlement petition under Section 271(4A) before the Commissioner of Income-tax, Vidharbha, Nagpur, whereby he denied having earned any income from business in any other name.
From a perusal of the photocopy of the petition submitted to the Commissioner, Nagpur, we find that what the assessee has. stated therein was that he had not done any business in any other names except mentioned above. This part of the assessee's assertion is found in paragraph 4 of the petition, which reads as under:
4. During the course of search the documents were found relating to the business in curtain cloths, etc. carried on in the following names:-
1. Hindustan Traders.
2. Gadge Sales Corporation.
3. Associated Agencies.
4. Ever green Agencies.
5. M/s. Asain Enterprises.
6. M/s. Khadatkar & Co.
7. M/s. Wiltex Bombay.
8. M/s. General and Allied Agencies.
The petitioner has not done any business in any other names except mentioned above.
12. As a result of the above discussion and the facts and circumstances of the case stated before us we have come to the conclusion that there was full justification for the Income-tax Officer to have levied penalties under Section 271(1)(c) for all the five years in question and that there was no warrant for the learned Commissioner (Appeals) to have cancelled those penalties. As regard the appeal of the assessee for the assessment year 1982-83 questioning the order of the learned Commissioner (Appeals) upholding the penalty of Rs. 6,834, we find that there is absolutely no case for interfering with that part of the impugned order. The assessee had not offered any explanation in relation to the concealment of the income of Rs. 6,834 from house property. Since this part of the income was declared for the first time in the revised return, it clearly tantamounted to an unequivocal admission of concealment. The learned Commissioner (Appeals) was, therefore, fully justified in upholding this part of the penalty in relation to the assessment year 1982-83.
13. As a result of the above discussion, we hold that the impugned order of the learned Commissioner (Appeals), whereby he cancelled the penalties in full for the assessment years 1978-79 to 1981-82, cannot be sustained. Similarly that part of the impugned order whereby the assessee's appeal was partly allowed also cannot be upheld. We, therefore, allow the five departmental appeals and quash the impugned order of the learned Commissioner (Appeals) whreby he cancelled the penalties under Section27(1)(c) for the five years in question. The assessee's appeal for the assessment year 1982-83 shall stand dismissed. The ITO's orders for all the five years are restored.