Madhya Pradesh High Court
S.S. Ratanchand Bholanath vs Commissioner Of Income-Tax on 13 April, 1994
Equivalent citations: [1994]210ITR682(MP)
Author: Chief Justice
Bench: Chief Justice
JUDGMENT U.L. Bhat, C.J.
1. The following questions of law have been referred to this court by the Income-tax Appellate Tribunal, Jabalpur, at the instance of the assessee under Section 256(1) of the Income-tax Act, 1961:
"(1) Whether, on the facts and in the circumstances of the case, the Income-tax Officer's order dated September 4, 1976, was legally valid ?
(2) If the answer to question No. (1) is in the affirmative whether the question of legality of the assessment could be gone into in penalty proceedings ?"
2. The assessee is a Hindu undivided family. The assessment year is 1971-72. The Assessing Officer passed an assessment order. In appeal by the assessee, the appellate authority reduced certain additions and on the question whether the amount of sales tax penalty paid by the assessee is liable to be deducted from the income, it directed the Assessing Officer to decide afresh after giving an opportunity to the assessee. The appellate authority thereby set aside the assessment order. During reassessment proceedings, the assessee admitted that a sum of Rs. 11,027 relating to the sale of a tempo-van on account of wrong totalling is liable to be added to the income. The Assessing Officer passed a reassessment order adding Rs. 11,027 to the total income. He also initiated penalty proceedings against the assessee. The assessee did not challenge the reassessment order in appeal. The penalty proceedings ended with an order levying penalty of Rs. 12,000 on account of concealment of income of Rs. 11,027. The appeal filed by the assessee was dismissed by the Commissioner and the second appeal was dismissed by the Tribunal.
3. Question No. 1 : Learned counsel for the assessee contends that the appellate authority while disposing of the appeal against the assessment order did not set aside the assessment "order in its entirety but directed fresh consideration of the controversy regarding sales tax penalty and, therefore, the scope of remand was very limited. According to learned counsel, the assessing authority could not have travelled outside the direction given by the appellate authority to add Rs. 11,027 to the total income. Learned counsel relied on the decisions in Katihar Jute Mills (P.) Ltd. v. CIT [1979] 120 ITR 861 (Cal); Surrendra Overseas Ltd. v. CIT [1979] 120 ITR 872 (Cal) and ITO v. Ryam Sugar Co. Ltd. [1976] 105 ITR 819 (Cal) in support of his contention that the Assessing Officer on remand cannot decide a question not dealt with by the remand order. Learned counsel for the Revenue places reliance on CIT v. Buildwell Assam (P.) Ltd, [1982] 133 ITR 736 (Gauhati) ; CIT v. Seth Manicklal Fomra [1975] 99 ITR 470 (Mad); Pulipati Subbarao and Co. v. AAC [1959] 35 ITR 673 (AP) and Abhai Ram Gopi Nath v. CIT [1971] 79 ITR 339 (All) to contend for the position that there is no restriction on the power of the Assessing Officer in completing the assessment after remand.
4. It is unnecessary for us to express our opinion in regard to the above controversy since we are satisfied that in the instant case the Assessing Officer was justified in adding Rs. 11,027 to the income because the assessee itself informed the Assessing Officer that there is an error in the balance-sheet to the extent of the amount mentioned above. Where such a mistake is admitted by the assessee itself, we do not think that there is any fault on the part of the Assessing Officer in taking such sum into consideration in completing the assessment. Ground No. 1 was therefore to be answered in favour of the Revenue.
5. Question No. 2 : It is contended for the Revenue that even assuming that the addition of Rs. 11,027 in the income was erroneous, the assessee cannot raise this question in penalty proceedings since the reassessment order was not challenged in appeal. The answer of the assessee is that penalty proceedings are quasi-criminal in nature, that the Department has to establish in penalty proceedings that there has been concealment of income, that though the findings in the assessment order constitute evidence in penalty proceedings they are not conclusive and the matter has to be decided afresh in penalty proceedings. Therefore, it is submitted that the assessee can challenge the assessment order in the penalty proceedings. The assessee relied on the decision of the Bombay High Court in Jainarayan Babulal v. CIT [1988] 170 ITR 399. This decision relies on an earlier decision of the Bombay High Court in CIT v. Gokuldas Harivallabhdas [1958] 34 ITR 98, which is approved by the Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696.
6. In Anwar Ali's case [1970] 76 ITR 696, the Supreme Court has indicated that the provision in question is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the Legislature considers to be against the public interest and held that 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. The court observed (at page 701) :
"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."
7. A reading of the above observations shows that while assessment proceedings may constitute good evidence in penalty proceedings, they are not conclusive. The statutory authority dealing with penalty proceedings must be satisfied that the assessee had consciously concealed the particulars of his income which attracts the penal provisions of the Act. In the present case, the assessee himself told the Assessing Officer that there was a suppression of income to the extent of Rs. 11,027. This was also verified by the Assessing Officer, and hence the question of the authority in penal proceedings coming to any conclusion different from the one arrived at in the reassessment proceedings does not arise. The above decision is not an authority for the position that where the reassessment is not challenged in appeal, the order as such can be collaterally challenged in penalty proceedings. If the assessment order or reassessment order becomes final, that is binding on both the parties and neither party can seek to reopen it in a penalty proceeding. This conclusion, of course, does not affect the settled position of law that the assessment order or reassessment order is not conclusive in penalty proceedings. We, therefore, hold that question No. 2 has to be answered in favour of the Revenue.
8. Question No. 1 is answered in the affirmative and question No. 2 is answered in the negative. Both are answered in favour of the Revenue and against the assessee. The reference is disposed of accordingly. There shall be no order as to costs.