Patna High Court
Lakshmi Narain Shambhuram vs Commissioner Of Income-Tax, Bihar And ... on 31 January, 1962
Equivalent citations: [1963]49ITR350(PATNA)
JUDGMENT
For the assessment year 1947-48 the Income-tax Officer added a sum of Rs. 63,000 to the net profits shown by the assessee, Lakshmi Narain Shambhuram of Dhanbad. It appears that on the 26th September, 1946, the assessee obtained an overdraft of Rs. 60,000 from the Bharat Bank Limited, Jharia branch. The overdraft was obtained on the security of three fixed deposits in the Bharat Bank Limited in the following names :
Rs.
1.
Sri Bishwanath Gupta ...
24,000
2. Sri Rukmanand Sarraf ...
19,000
3. Sri Raghunath Sarraf ...
20,000 63,000 The Income-tax Officer was not satisfied with the explanation of the assessee, and after examining the three alleged depositors the Income-tax Officer came to the conclusion that the amount of money in fixed deposit to the extent of Rs. 63,000 really belonged to the assessee and represented his income from some undisclosed source. The Income-tax Officer accordingly added this amount to the taxable income of the assessee. He also issued a notice under section 28(3) of the Indian Income-tax Act and ultimately imposed a penalty of Rs. 15,000 on the ground that the assessee had concealed the particulars of his income. The assessee took the matte in appeal before the Appellate Assistant Commissioner who dismissed the appeal confirmed the order of penalty and also the assessment made under section 23(3) of the Indian Income-tax Act. The assessee preferred appeals before the Income-tax Appellate Tribunal against the order of the Appellate Assistant Commissioner, but these appeals were also dismissed.
In pursuance of an order of the High Court under section 66(2) of the Indian Income-tax Act, the Income-tax Appellate Tribunal has stated a case on the following questions of law :
"1. Whether in the facts and circumstances of the case the amount of Rs. 63,000 deposited by Sri Rukmanand Sarraf, Sri Bishwanath Gupta and Sri Raghunath Sarraf in fixed deposit with the Bharat Bank Limited, Jharia, was validly assessed to income-tax in the hands of the assessee ?
2. Whether in the facts and circumstances of the cases the penalty imposed under section 28(1)(c) of the Income-tax Act upon the assessee is legally valid ?"
With regard to the first question it was submitted by the learned Government advocate on behalf of the assessee that there was no sufficient material before the income-tax authorities to indicate that the amount of Rs. 63,000 deposited by Sri Bishwanath Gupta, Sri Rukmanand Sarraf and Sri Raghunath Sarraf really belonged to the assessee and represented his secret profit from some undisclosed source. We are unable to accept the argument of the learned Government advocate as correct. After having persuade the order of the Income-tax Appellate Tribunal dated the 14th February, 1958, we are satisfied that there was sufficient material before it for reaching the conclusion that the amount of Rs. 63,000 in fixed deposit with the Bharat Bank Limited, Jharia, was the secret income of the assessee and was, therefore, validly assessed to income-tax. In the first place, the Tribunal has taken into account the circumstance that it was quite improbable that the three alleged depositors, namely, Sri Bishwanath Gupta, Sri Rukmanand Sarraf and Sri Raghunath Sarraf, who had never done any colliery business before, should think of purchasing a colliery from one Deokinandan. There was also the circumstance that there was no previous negotiation between the three alleged depositors and Deokinandan about the purchase and sale of a colliery. It has also been observed by the Income-tax Appellate Tribunal that it was quite improbable that these three persons should carry large amounts of money in cash from Fatehpur in Rajasthan to Dhanbad. The Income-tax Appellate Tribunal also considered that it was improbable that the three alleged depositors should deposit the money in a Dhanbad bank though their ordinary place of residence and of business was in distant Rajasthan. It has also been pointed out that the three depositors were businessmen and they would not lock a huge amount of money in the bank at a low rate of interest though there was the admitted possibility before them of earning greater profits in the business normally carried on by them. The Income-tax Appellate Tribunal also disbelieved the story of these depositors that they had again gone in October, 1947, to Dhanbad for withdrawal of the fixed deposit. For all these reasons the Income-tax Appellate Tribunal rejected the statement of the three alleged depositors as untrue and held that the explanation of the assessee with regard to the ownership of Rs. 63,000 was not acceptable. In our opinion it is manifest that there was sufficient material before the Income-tax Appellate Tribunal to support its conclusion that the amount of Rs. 63,000 standing as fixed deposit in the Bharat Bank in the names of Sri Bishwanath Gupta, Sri Rukmanand Sarraf and Sri Raghunath Sarraf was really the secret income of the assessee from an undisclosed source and was, therefore, liable to tax.
We accordingly answer the first question of law referred by the Income-tax Appellate Tribunal in favour of the income-tax department and against the assessee and hold that in the facts and circumstances of this case the amount of Rs. 63,000 deposited by Sri Bishwanath Gupta, Sri Rukmanand Sarraf and Sri Raghunath Sarraf in fixed deposit with the Bharat Bank Limited, Jharia, was validly assessed to income-tax in the hands of the assessee.
The second question of law however stands on a different footing. With regard to this question it was submitted by the learned Government advocate that a proceeding under section 28(1) of the Income-tax Act is a penal proceeding and the onus lies upon the income-tax department to show that the assessee is guilty of concealment of the particulars of his income or deliberate furnishing of inaccurate particulars of such income. In our opinion the argument is correct, and in a penal proceeding under section 28(1) of the Income-tax Act the onus lies upon the Income-tax department to show that the assessee is guilty of the offence mentioned in this section. The principle has been expressed by the House of Lords in Fattorini (Thomas) (Lancashir) Limited v. Inland Revenue Commissioners. It was pointed out by Lord Wright at page 55 of the report that the onus in such a proceeding was not of ambulatory or shifting character but the onus was finally upon the Crown to prove its right to impose what was a severe penalty. The same principle has been expressed in a recent decision of a Division Bench of this High Court in Khemraj Chagganlal v. Commissioner of Income-tax. The correctness of this principle was not disputed by the learned standing counsel appearing on behalf of the income-tax department. But it was contended by him that there was material in the present case to show that the assessee was guilty of suppression of his income. Having persuade the order of the Income-tax Appellate Tribunal in this case we are satisfied that the present case comes within the principle laid down by this High Court in Khemraj Chagganlal v. Commissioner of Income-tax, and the income-tax department has not discharge the onus of showing that the assessee is guilty of concealment of the particulars of his income or of deliberate furnishing of inaccurate particulars of his income or of deliberate furnishing of inaccurate particulars of such income. At page 14 of the paper book the Income-tax Appellate Tribunal has said that "it was obviously the duty of the assessee to put all relevant questions to his withes so that their depositions might give some coherent story from start to finish, and if the assessee failed to do so he must thank himself." The Income-tax Appellate Tribunal has misdirected itself in law on this point. As we have already said, the principle to be applied in a case of this character is that the onus in such a penal proceeding is not of an ambulatory or shifting character, but the onus is finally upon the Crown to prove its right to impose the penalty. For these reasons we hold that the income-tax department has not discharged the onus that lay upon it of proving beyond reasonable doubt that the assessee is guilty of concealment of the particulars of his income or of deliberate furnishing of inaccurate particulars of such income. The learned standing counsel of the income-tax department placed reliance upon the decision of this High Court in Murlidhar Tejpal v. Commissioner of Income-tax, where it was held, upon the facts of the case, that there was sufficient material to hold that there was willful suppression by the assessee of the particulars of his income within the meaning of section 28(1)(c) of the Income-tax Act. Having perused the order of the Income-tax Appellate Tribunal in this can, we are of opinion that the present case falls within the principle laid down in the earlier case, Khemraj Chagganlal v. Commissioner of Income-tax and not than laid down in the latter case, Murlidhar Tejpal v. Commissioner of Income-tax.
We are accordingly of opinion that in the facts and circumstances of this case the penalty imposed under section 28(1)(c) of the Income-tax Act upon the assessee is not legally valid. We answer the second question of law, therefore, in favour of the assessee and against the income-tax department.
In the circumstances of this case we do not propose to make any order as to costs of this reference.