Commissioner Of Income-Tax vs Bishamber Nath Ram Sarup
2000 Latest Caselaw 996 Del

JUDGMENT

Arijit Pasayat, C.J.

1. At the instance of the Revenue, the following question has been referred under Section 256(1) of the Income-tax Act, 1961 (in short the "Act"), by the Income-tax Appellate Tribunal, Delhi Bench "A" (in short "the Tribunal"), for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in cancelling the penalty of Rs. 35,000 imposed by the Inspecting Assistant Commissioner under Section 271(1)(c), by holding that the negative onus which lies on the assessed under the Explanation to Section 271(1)(c) stands discharged ?"

2. The factual position essentially is as follows :

The assessed, a registered firm of commission agents in ghee, was also carrying on money-lending business. While scrutinising the books of account for the assessment year 1965-66, the Assessing Officer found a large number of cash credits. He treated them as unexplained and added a sum of Rs. 4,62,920 as income of the assessed from undisclosed sources, since these entries were found in certain books of account which were held to be duplicate sets of accounts of the assessed. The matter was challenged in appeal before the Appellate Assistant Commissioner (in short the "AAC"). Though a stand was taken by the assessed that the books of

account did not belong to it, such contention was rejected. The Appellate Assistant Commissioner worked out the peak credit in so far as the unexplained cash credits were concerned at Rs. 48,869. Accordingly, the addition was restricted to Rs. 48,869. In the meantime proceedings under Section 271(1)(c) of the Act were initiated and referred to the Inspecting Assistant Commissioner (in short the "IAC") for disposal. In response to the notice issued by the Inspecting Assistant Commissioner, the assessed took the stand that the books of account did not belong to it and in fact the munim of the assessed, who was charged with embezzlement of funds had handed over certain books of account to various authorities with mala fide intent. Considering the explanation submitted by the assessed, the Inspecting Assistant Commissioner took the view that the Explanation to Section 271(1)(c) was applicable and, therefore, it was for the assessed to prove that its failure to return the correct income was not due to fraud or gross or willful neglect on its part. The Inspecting Assistant Commissioner concluded that the assessed failed to do so. Accordingly, penalty of Rs. 35,000, being 75 per cent, of the tax which would have been avoided if the income returned by the assessed had been accepted as the correct income, was imposed.

3. The matter was challenged in appeal before the Tribunal. By judgment dated September 17, 1975, in I.T.A. No. 850 (Del) of 1972-73, the Tribunal cancelled the penalty, on the basis of several factors which weighed with it and had been noticed in its order in I.T.A. No. 849 of 1972-73. In the said case the Appellate Assistant Commissioner was directed to look into the matter further and if the peak credits occurring in the accounting year were found to be really covered by the earlier peak credits, he should give necessary relief to the assessed. However, it was observed that the conclusions in the assessment proceedings about the ownership of the assessed of the duplicate sets of accounts, did not automatically lead to an inference about the genuineness of the entries in those books of account in the penalty proceedings. Therefore, it was held that the Explanation to Section 271(1)(c) stands discharged.

4. Learned counsel for the Revenue submitted that the onus has been wrongly held to have been discharged. Analysis of the factual position as drawn by the Tribunal is contrary to material and evidence on record. Further the law laid down by the apex court in CIT (Addl.) v. Jeevan Lal Sah [1994] 205 ITR 244 as also the decision of the apex court in CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 has not been kept in view.

5. There is no appearance on behalf of the assessed in spite of notice.

6. On a reading of the Tribunal's order, we feel that the matter needs to be reheard by the Tribunal. If on working out further details as directed by the Tribunal in I.T.A. No. 849 of 1972-73, the income is of such a quantum that the Explanation to Section 271(1)(c) does not apply, then the matter

need not proceed further. If after working out the details as provided by the Tribunal there is scope for further addition, then the Tribunal has to consider it in the background of the Explanation to Section 271(1)(c) of the Act keeping in view the principles as laid down by the Supreme Court in the aforesaid two eases (Jeevan Lal Sah's case [1994] 205 ITR 244 and Mussadilal Ram Bharose's case [1987] 165 ITR 14). Therefore, the matter is remitted back to the Tribunal for reconsideration. The reference application stands disposed of.