Commissioner Of Income-Tax vs Radhey Shyam
2000 Latest Caselaw 690 Del

JUDGMENT

D.K. Jain, J.

1. At the instance of the Revenue, the Income-tax Appellate Tribunal, Delhi (for short the "Tribunal"), has referred under section

256(1) of the Income-tax Act, 1961 (for short the "Act"), the following question, arising out of ITA No. 504 (Delhi) of 1976-77, for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in deleting the penalty levied by the Inspecting Assistant Commissioner amounting to Rs. 10,000 under Section 271(1)(c) of the Income-tax Act, 1961 ?"

The facts lie in a very narrow compass. The reference relates to the assessment year 1968-69. For the relevant assessment year the assessee, an individual, filed his return on September 4, 1968, declaring a total income of Rs. 14,917. An ex parte assessment was completed on March 29, 1972, on a total income of Rs. 98,417. It appears that the assessment was reopened, whereafter the assessee filed a revised return some time in January, 1974, declaring" a total income of Rs. 24,080 and was accordingly assessed. In the said return a sum of Rs. 10,000 was included, which according to the assessee was on the basis of a voluntary disclosure petition filed before the Income-tax Officer. However, according to the Assessing Officer, the settlement arrived at was not entirely on a voluntary basis but after certain enquiries had been conducted by the Intelligence Wing of the Directorate of Inspection. The amounts were spread over on the basis of certain directions given by the Commissioner of Income-tax and, accordingly, the assessee had included the abovenoted sum of Rs. 10,000 in his total income. On completion of the assessment, penalty proceedings under Section 271(1)(c) of the Act were initiated against the assessee. After granting an opportunity of being heard, the Income-tax Officer levied on the assessee a minimum penalty of Rs. 10,000 under Section 271(1)(c) of the Act for allegedly concealing the particulars of his income by furnishing inaccurate particulars.

2. In appeal, the Appellate Assistant Commissioner confirmed the said penalty. The assessee carried the matter in further appeal to the Tribunal. One of the contentions urged before the Tribunal was that the original return having been filed on September 14, 1968, and assuming that there was some concealment in the return, the penalty under the said section could be imposed only on the basis of law as it stood on the date on which the offence was committed and, therefore, the minimum penalty leviable being in excess of Rs. 1,000 the jurisdiction to impose the penalty lay with the Inspecting Assistant Commissioner and not with the Income-tax Officer. It seems that having got some inkling about the merits of the said argument, the Income-tax Officer, without waiting for the decision of the Tribunal, referred the matter to the Inspecting Assistant Commissioner for the purpose of levy of penalty under the said section. The Inspecting Assistant Commissioner, accordingly, after issuing a show-cause notice to the assessee levied a penalty of Rs. 10,000 on him. It is interesting to note that, while levying the penalty, the Inspecting Assistant Commissioner

fairly noted that he was levying the penalty to safeguard the interests of the Revenue as the assessee had challenged before the Tribunal the jurisdiction of the Income-tax Officer to levy such a penalty.

3. Being aggrieved by the second penalty order, the assessee took the matter in appeal to the Tribunal. The Tribunal, after taking into consideration the order passed by the Commissioner of Income-tax, on the basis whereof the said penalty was levied, held that the order of the Commissioner could not be treated as a direction to the Income-tax Officer or to the Inspecting Assistant Commissioner to levy a penalty. According to the Tribunal, the discretion for levy of penalty vests in these officers and they have to exercise their discretion in a judicial manner. Accordingly, the Tribunal came to the conclusion that the order levying penalty suffered from the vital defect of non-application of mind by the Inspecting Assistant Commissioner and, therefore, the penalty could not be sustained. On the Revenue's moving an application under Section 256(1) of the Act, the aforenoted question has been referred.

4. We have heard Mrs. Prem Lata Bansal, for the Revenue, and Mr. S.K. Aggarwal, for the assessee.

5. It is vehemently submitted by learned counsel for the Revenue that the petition for settlement before the Commissioner having been filed by the assessee only after the enquiries had been made by the Intelligence Wing of the Directorate of Inspection, no further duty was cast on the Inspecting Assistant Commissioner to record a finding regarding the manner in which the assessee has concealed the particulars of his income. It is urged that merely because the assessee went in for settlement with the Department, it could not be said that no penalty was leviable on him, particularly when the Commissioner of Income-tax, while accepting the settlement had suggested "that the penalties that may be leviable on him under Section 271(1)(c) of the Income-tax Act, 1961, in respect of each of the assessment years mentioned in para. 8 should be limited to the minimum leviable in accordance with the provisions of Section 271 of the Act as applicable to each year". It is asserted that in view of the said direction by the Commissioner of Income-tax a minimum penalty was leviable on the assessee. We are unable to agree with learned counsel.

6. As noted above, the assessment year involved is 1968-69. We are, therefore, concerned with the provisions of law as they existed prior to some significant amendments, like deeming provisions, brought by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. In CIT v. Anwar Ali [1970] 76 ITR 696, the locus classicus on the subject, the Supreme Court considered the question of onus in the pre-1976 period and laid down that before a person could be visited with a penalty for concealment, etc., the Revenue must prove that the amount in question was the income of the assessee and that he had concealed it with a motive.

It was also held that penalty could not be imposed merely because the explanation furnished by the assessee was not believed to be true by the Revenue.

7. A bare perusal of the order of the Inspecting Assistant Commissioner shows that apart from the fact that the Inspecting Assistant Commissioner has levied the penalty merely to protect the interests of the Revenue on account of the assessee's challenge to the jurisdiction of the Income-tax Officer to levy the said penalty, the penalty for concealment of income has been levied only on the ground that the said amount is the concealed income as per settlement with the Commissioner of Income-tax. We have no hesitation in holding that the learned Inspecting Assistant Commissioner has failed to follow the settled principles of law. The penalty proceedings being quasi-criminal, these are independent of assessment proceedings and before levying a penalty under Section 271(1)(c) of the Act, as it stood at the relevant time, it was mandatory for the Inspecting Assistant Commissioner to record a finding that the income disclosed by the asses-see in his settlement petition before the Commissioner of Income-tax was the income of the assessee which he did not disclose with a motive and was compelled to do so on account of the fear of investigation which are said to have been conducted by the Directorate of Intelligence. The Inspecting Assistant Commissioner has failed to demonstrate that the stand of the assessee that the settlement was arrived at to buy peace of mind and to avoid litigation with the Department was not correct. As noted above, in the order of the Inspecting Assistant Commissioner, levying penalty, there is not even a whisper either about the nature of the enquiries conducted by the Intelligence Wing of the Department or the nature of the income, which is alleged to have been concealed or in respect whereof inaccurate particulars have been furnished. We are in agreement with the view taken by the Tribunal that the order of the Commissioner, briefly noted above, cannot be construed as a direction for levying the penalty necessarily. It was obligatory on the Inspecting Assistant Commissioner to record a finding to the effect that the income in question was the assessee's undisclosed income and he was guilty of furnishing inaccurate particulars of his income and then to proceed to determine the quantum of the penalty. The conclusions on the factual position arrived at by the Tribunal are pure questions of fact and strictly speaking no question of law arises from the order of the Tribunal. We are, therefore, of the opinion that no fault can be found with the order of the Tribunal deleting the aforesaid penalty.

8. For the foregoing reasons, we answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue. There will be no order as to costs.