Cit vs Ratnasi Deoji Patel (Hue)
2007 Latest Caselaw 395 Bom

JUDGMENT

J.P. Devadhar, J.

1. All these four reference applications under Section 256(2) of the Income Tax Act, 1961, are filed by the revenue against the common order passed by the Tribunal dated 9-12-1993, in R.A. Nos. 353, 354, 355 and 356/Nag/1993, declining to refer the following questions of law for the opinion of this Court.

1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in affirming the order of the Commissioner (Appeals) in cancelling the penalty levied by the assessing officer under Section 271(1)(c) of the Act ?

2. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the exercise books found in the possession of the assessee, though they are not books of account but in the strictest sense of the terms, they are books of account?

3. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that once the assessing officer accepted the offer of the assessee in the proceedings under Section 132(5) and also accepted the returns filed by the assessee then the prima facie presumption that can be raised is that there was some communication between the department and the assessee ?

4. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the books of account found in the possession of the assessee contained the names of the various other members of the family and the explanation of the assessee that the income offered by him for taxation with a view to buy peace in fact belonged to the different members of the family is supported by concrete material ?

5. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that in this case, there was no admission of concealment and the assessee himself returned certain items of investments as his income in the returns filed for the first time and they were accepted by the department and hence the decision of the Supreme Court in the case of Sir Shadilal Sugar and General Mills Ltd. reported in (1987) 168 ITR 705 is clearly applicable to the facts of the present case ?

6. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that there is no evidence on record to prove that there was surrender of income as concealed income ?

7. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that none of the Explanations to Section 271(1)(c) of the Act are applicable to the facts of this case ?

2. The assessment years involved herein are the assessment years 1982-83 to 1985-86.

3. On August 29/30, 1985,. there was a search action carried out in the residential premises of the assessee and his sons, as also the business premises of M/s. Patel Saw Mills and Patel Timber Industries at Chandrapur. During the course of search, various incriminating documents were found at the residential premises of the assessee as well as the business premises of M/s. Patel Timber Industries and Patel Saw Mills, Chandrapur. It was also noticed that the assessee has made huge investments by lending money on promissory notes, construction of house property, etc. Up to the date of search the assessee had not filed any return of income for the assessment years in question. Upon notice issued under Section 148 of the Act for the assessment years 1982-83 to 1984-85 and notice under Section 139(2) of the Act, for the assessment year 1985-86, the assessee filed the returns of income on 31-10-1985,, declaring the income which was noticed from the note books seized during the course of search. In the returns the assessee had stated that the amount of pro notes and amounts invested in the construction of the house property was out of ancestral funds and also from accumulated agricultural income of past several years. According to the assessee, the said amount do not represent the income of the year of assessment in which investments were made. However, since there was no documentary evidence available with the assessee with regard to the said investment, with a view to have peace the assessee has offered the amount voluntarily. The assessing officer accepted the amount offered by the assessee by passing assessment orders for the assessment years in question, but levied penalty under Section 271(1)(c), by invoking Explanations 1, 4(a) and 5 to Section 271(1)(c) of the Act.

4. On appeal, the Commissioner (Appeals) after considering the various decisions, held that the levy of penalty under Section 271(1) (c) of the Act was not justified. The Tribunal has upheld the order of the Commissioner (Appeals). Since the reference application filed by the revenue under Section 256(1) of the Act was rejected by the Tribunal, the revenue has filed these applications under Section 256(2) of the Act.

5. In all these cases, it is not in dispute that the returns were not filed by the assessee prior to the date of search. During the course of search an exercise book was seized, wherein it was noticed that the assessee had made investment in promissory notes and also in the construction of a house. Mr. Thakkar, learned Counsel appearing on behalf of the assessee/respondent, relied upon the decision of the Hon'ble Apex Court in the case of CBI v. V.C. Shukla , and submitted that the note books seized during the course of search was books of account maintained by the assessee in the regular course of business and therefore, Explanation 5 to Section 271(1)(c) of the Act, invoked by the assessing officer was not justified. This Court in the case of Sheraton Apparels v. Asst. CIT has held that the books recorded facts, but not maintained for computation of income, cannot be said to be books of account. In this view of the matter, the questions of law do arise out of the order passed by the Tribunal. Accordingly, we allow the applications on the following two questions of law, which read as under:

1. Whether, on the facts and in the circumstances of the casd, the Income Tax Appellate Tribunal was justified in affirming the order ofthe Commissioner (Appeals) in cancelling the penalty levied by the assessing officer under Section 271(1)(c) of the Act ?

2. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the exercise books found in the possession of the assessee, though they are not books of account but in the strictest sense of the terms, they are books of account ?

6. The Tribunal is directed to forward the statement of case as expeditiously as possible. All these applications are allowed. Rule is made absolute, with no order as to costs.